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termine the associated risk measure in this equipment investment in terms of standard deviation. Because of the uncertainty of technology being used in this equipment, it has not been possible to get the initial cost accurately. The annual benefit, however, is estimated to be $20,000 with a possible equipment life of 5 years. The salvage value is expected to be 10% of the initial cost. MARR =8% First Cost, $ $50,000 $80,000 $100,000 $125,000 Probability 0.25 0.35 0.30 0.10

termine the associated risk measure in this equipment investment in terms of standard deviation. Because of the uncertainty of technology being used in this equipment, it has not been possible to get the initial cost accurately. The annual benefit, however, is estimated to be $20,000 with a possible equipment life of 5 years. The salvage value is expected to be 10% of the initial cost. MARR =8% First Cost, $ $50,000 $80,000 $100,000 $125,000 Probability 0.25 0.35 0.30 0.10

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Determine the associated risk measure in this equipment investment in terms of standard deviation. Because of the uncertainty of technology being used in this equipment, it has not been possible to get the initial cost accurately. The annual benefit, however, is estimated to be $20,000 with a possible equipment life of 5 years. The salvage value is expected to be 10% of the initial cost. MARR =8%

 

First Cost, $       $50,000            $80,000            $100,000          $125,000

Probability        0.25                 0.35                 0.30                 0.10

 

 

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