Ross System received a price quote for a CNC router for a cost of $50,000. The o
ID: 1099871 • Letter: R
Question
Ross System received a price quote for a CNC router for a cost of $50,000. The operation and maintenance cost is expected to be about $2,000 per year. Salvage value is expected to be zero when the machine is retired. Since it is a machine based on a new design, the life is expected to vary anywhere from 4 to 7 years with the associated probabilities as shown in the table below. If the interest rate is 12%, what is the expected EUAC for this router?
Life, Years
4
5
6
7
Probability
10%
20%
40%
30%
$13,160
$15,970
$16,460
$14,571
Life, Years
4
5
6
7
Probability
10%
20%
40%
30%
Explanation / Answer
14571
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