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EGR 403 XYZ Company operates a robot assembly plant established two years ago with a $3 million capital investment. Annual operational costs are projected at $100,000 for the next five years, with a potential increase to $150,000 per year during years six to ten (50% probability). Profits from sales are estimated at $400,000 in the first year, increasing by $20,000 each subsequent year. An additional $200,000 maintenance cost is expected in four years, with the plant anticipated to sell for $20 million in eight years.
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EGR 403 XYZ Company assembles robots. The assembly plant was established 2 years ago with a capital of $3 million. The annual costs have been $100,000 since then and are estimated to remain the same for the next 5 years. However, annual cost will increase to $150,000 per year with 50% probability for the years 6 to 10. Sales’ profit is estimated to be $400,000 at the end of first year and expected to increase by $20,000 for each coming year. It is also estimated to have an additional preventive maintenance cost of $200,000 4 years from now. The plant will be sold for $20 million in 8 years.