El Paso Company is planning to get a machine that will cost $14,000 and is expected to last for 7 years. The company uses straight-line depreciation. The tax rate of El Paso is 31% and the proper discount rate in this case is 12%. Find the minimum pretax earnings per year that the machine must generate to become profitable. The machine is expected to have $4000 pretax earnings annually, with a standard deviation of $1000. Calculate the probability that the machine will turn out to be profitable. Show solutions.