Problem $13-16($Algo$)$ Expected value with net present value $[$LO$13-1]$

Debby's Dance Studios is considering the purchase of new sound equipment that will enhance the popularity of Its aerobics

dancing. The equipment will cost $$15,800.$ Debby is not sure how many members the new equipment will attract, but she

estimates that her Increased annual cash flows for each of the next five years will have the following probability distribution.

Debby's cost of capltal is $13$ percent. Use Appendlx $D$ for an approximate answer but calculate your final answers using the

formula and financlal calculator methods.

a$.$ What is the expected value of the cash flow? The value you compute will apply to each of the five years.

Expected cash flow

b$.$ What is the expected net present value?

Note: Negatlve amount should be Indlcated by a minus sign. Do not round Intermedlate calculatlons and round your

answer to $2$ decimal places.

Net present value

c$.$ Should Debby buy the new equipment?

No

Yes