Gopher Manufacturing Is Considering Purchasing New Calibration Equipment to Improve

question 3

Essay

Gopher Manufacturing is considering purchasing new calibration equipment to improve the quality of its processes. The equipment has an initial cost of $66,000 and a market value of $52,000 at the end of its useful life of 10 years. Net annual revenue is estimated based on the production and market conditions and is shown below. If the optimistic and pessimistic values each have an estimated 11% chance of occurring, determine whether the equipment should be purchased on the basis of the expected value of AW. Use a MARR of 8% per year. $$\begin{array} { | l | l | l | l | } \hline & \text { Optimistic } & \text { Most likely } & \text { Pessimistic } \\\hline \text { Net annual revenue, } \$ / y e a r & 93,500 & 90,000 & 88,500 \\\hline\end{array}$$

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Definitions:

Nonprescription Drugs

Medications that can be purchased without a doctor’s prescription, also known as over-the-counter (OTC) drugs.

Aspirin

A medication used to reduce pain, fever, inflammation, and, in low doses, to prevent blood clots.

Diet Pills

Medications or supplements taken to help reduce or control weight, often by suppressing appetite or increasing metabolism.

Teratogen

From the Greek word tera, meaning “monster,” this term refers to any agent that causes a birth defect. Teratology is the field of study that investigates the causes of birth defects.