You are doing ananalysis on the feasibility of installing a drill press inyour
factory. Unfortunatelyyou are not clairvoyant and can only guess at the annualbenefits,
salvage value and lifetime (in years) of the drill press. These values, along with the probabilities of their occurrenceare given in the table below.
Potential annual benefit Probability Potential life time Probability Potential salvagevalue Probability
1500 20% 10 15% -200 15%
2000 50% 11 25% 0 25%
2200 20% 12 35% 500 50%
2500 10% 13 25% 1000 10%
If the drill press costs $10,000 determine the expected benefit to cost ratio of the project using a MARR of 15%. Should the automated drill press bepurchased?