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Problem 1. (20 points) A new equipment is being considered at a local company at a cost of $250,000. The operation and maintenance costs of
Problem 1. (20 points) A new equipment is being considered at a local company at a cost of $250,000. The operation and maintenance costs of this equipment are estimated to be about $25,000 per year. Salvage value is expected to be $50,000 at the end of its useful life. The life of this equipment is estimated to vary anywhere from 6 to 9 years with the associated probabilities as shown in the table below. If an interest rate of 8% is used, what is the expected EUAC for this equipment? Life, Years 6 7 8 9 Probability 0.3 0.25 0.2 0.25
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