Question: A new machine will cost $25,000. The machine is expected to last 4 years and have no salvage value. If the interest rate is 12%, determine the return and the risk associated with the purchase. The following projections have been made.
| Scenario |
1 |
2 |
3 |
| probability |
0.3 |
0.4 |
0.3 |
| annual savings |
$7000 |
$8500 |
$9500 |