Debby’s Dance Studios is considering the purchase of new sound equipment that will enhance the popularity...

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Debby’s Dance Studios is considering the purchase of new soundequipment that will enhance the popularity of its aerobics dancing.The equipment will cost $20,900. Debby is not sure how many membersthe new equipment will attract, but she estimates that herincreased annual cash flows for each of the next five years willhave the following probability distribution. Debby’s cost ofcapital is 15 percent. Probability Cash flow 0.1 $4,570 0.3 5,5500.4 7,400 0.2 9,930 a. What is the expected cash flow? Expectedcash flow $ b. What is the expected NPV? (Round "PV Factor" to 3decimal places. Do not round intermediate calculations. Round thefinal answer to the nearest whole dollar.) NPV $ c. Should Debbybuy the new equipment? Yes No

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Debby’s Dance Studios is considering the purchase of new soundequipment that will enhance the popularity of its aerobics dancing.The equipment will cost $20,900. Debby is not sure how many membersthe new equipment will attract, but she estimates that herincreased annual cash flows for each of the next five years willhave the following probability distribution. Debby’s cost ofcapital is 15 percent. Probability Cash flow 0.1 $4,570 0.3 5,5500.4 7,400 0.2 9,930 a. What is the expected cash flow? Expectedcash flow $ b. What is the expected NPV? (Round "PV Factor" to 3decimal places. Do not round intermediate calculations. Round thefinal answer to the nearest whole dollar.) NPV $ c. Should Debbybuy the new equipment? Yes No