I am planning on purchasing a new Tractor, There are two machinechoices, Tractor A and Tractor B. Tractor A will cost $175,000 andTractor B will cost $275,000. Due to various uncertainties inmanufacturing operations, the useful life of each machine isunknown, but the following probability estimates have beenmade.
Useful life (years) | Probability |
Machine A | Machine B |
15 | 0.15 | 0.25 |
25 | 0.25 | 0.45 |
35 | 0.45 | 0.20 |
45 | 0.15 | 0.10 |
A. Determine the expected life of each machine.
B. Based on the ratio of purchase cost to expected life, whichmachine would you recommend?
