A machine costing $25,000 to buy and $3,000 per year to operate will save mainly labor expenses

Question:

A machine costing $25,000 to buy and $3,000 per year to operate will save mainly labor expenses in packaging over six years. The anticipated salvage value of the machine at the end of six years is $5,000. For the machine to recoup a 12% return on investment (rate of return), what minimum required annual savings in labor must this machine provide?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...

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