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0 125 250 375 500 625 750 875 1,000

Total profits ($000)

0 125 250 375 500 625 750 875 1,000

Total profits ($000)

P14.6 Risk-Adjusted Discount Rates. One-Hour Dryclean, Inc., is contemplating replacing an obsolete dry-cleaning machine with one of two innovative pieces of equipment. Alternative 1 requires a current investment outlay of $25,373, whereas alternative 2 requires an outlay of $24,199. The following cash flows (cost savings) will be generated each year over the new machines' 4-year lives:

Probability Cash Flow

Alternative 1

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