Question: Cooper Construction is considering purchasing new, technologically advanced equipment. The equipment will cost $625,000 with a salvage value of $50,000 at the end of its

Cooper Construction is considering purchasing new, technologically advanced equipment. The equipment will cost $625,000 with a salvage value of $50,000 at the end of its useful life of 10 years. The equipment is expected to generate additional annual cash inflows with the following probabilities for the next 10 years:

Probability Cash Flow .

.15 $60,000

.25 85,000

.45 110,000 .

.15 130,000

A) What is the expected cash flow?

B) Cooper's cost of capital is 10%. What is the expected net present value?

C) Should Cooper buy the equipment?

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