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 ten years:
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?
A detailed step-by-step calculation of Expected Cash Flow and Net Present Value in Marketing Management provides students with a clear perspective of these complicated topics.