Usfan company is interested in purchasing a computer with, Ask an Expert

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Usfan Company is interested in purchasing a computer with uncertain life. The following table describes its expected life and resale value:

Expected life	Probability	Resale value
3 years	20%	$20,000
4 years	30%	$10,000
5 years	50%	$5,000

The computer will save company $40,000 annually while it is running. Usfan will depreciate it fully on the straight-line basis in three years. The tax rate of Usfan is 30%, and proper discount rate in this case is 12%. The cost of computer is $90,000. Should Usfan buy it?

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Statistics and Probability, Statistics

Category:- Statistics and Probability
Reference No.:- M918207

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