Find the probability that the machine will be profitable


Davis Hospital, a non-profit entity, wants to buy a machine for $135,000, which will run for 6 years. The savings from the machine are uncertain, with an expected value of $35,000 per year and a standard deviation of $10,000. The hospital uses 10% as the discount rate and it does not pay any income taxes. Find the probability that the machine will be profitable (that is its NPV > 0). Should the hospital buy the machine?

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Finance Basics: Find the probability that the machine will be profitable
Reference No:- TGS0599824

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