Question: Uncertain life and unknown initial investment: Davisson Hospital is tax exempt and it needs a NMR machine, which is expected to generate revenue of $60,000

Uncertain life and unknown initial investment: Davisson Hospital is tax exempt and it needs a NMR machine, which is expected to generate revenue of $60,000 annually. Its life will be either 4 years (probability 70%) or 5 years (probability 30%). If the proper discount rate to the hospital is 9%, how much should it pay for the machine just to break even?

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