A new machine is purchased to be part of a manufacturing process in order to increase efficiency

Question:

A new machine is purchased to be part of a manufacturing process in order to increase efficiency and the rate of production. The machine costs $500,000 and the estimated savings from using the machine are $200,000 per year. The useful life of the equipment in this application is uncertain. The estimated probabilities of different useful lives occurring are shown in the following table. Assume that = 12% per year before taxes and the market value at the end of its useful life is equal to zero. Based on a before-tax analysis

a. What are the E(PW), V(PW), and SD(PW) associated with the purchase of the equipment?
b. What is the probability that the PW is less than zero? Make a recommendation and give your supporting logic based on the results of your analysis.

MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...