Problem
A price quote for equipment at Paul Engineering has been received at a cost of $100,000. The operation and maintenance costs of this equipment are estimated to be about $20,000 per year. Salvage value is expected to be $10,000 when the machine is retired. The life of this equipment is estimated to vary anywhere from 5 to 9 years with the associated probabilities as shown in the table below. If the interest rate is 10%, what is the expected EUAC for this equipment?
Life, Years 5 6 7 8 9
Probability 0.3 0.1 0.15 0.20 0.25