An improved design of a computerized piece of continuous quality measuring equipment used to control the
thickness of rolled sheet products is being developed. It is estimated to sell for $125,000 more than the
current design. Based on present test data, however, the typical user has the following probabilities of achieving
different performance results and cost savings (relative to the current unit) in the first year of operation
(assume these annual cost savings would escalate 5% per year thereafter; a five-year analysis period is used; the
MARR=18%, and the net market value after five years is 0):
(a) Based on the E(PW), is the new design preferable to the current unit?
(b) Based on a decision tree analysis, what is the EVPI? What does the EVPI tell you?