Doubt has been cast over the accuracy of the year 2 and year 3 maintenance costs for Machine 2. On further investigation it was found that the following potential cash flows are now predicted:

Year           Cash flow                     Probability

($)

2                  18,000                           0·3

2                  25,000                           0·7

3                  23,000                          0·2

3                  24,000                         0·35

3                   30,000                        0·45

What is the expected present value of the maintenance costs for year 3?

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