A company is studying the acquisition of machinery to package production at a cost of $800,000. To
Question:
A company is studying the acquisition of machinery to package production at a cost of $800,000. To achieve the maximum level of machine efficiency, a certain degree of maintenance is necessary. The cost for this is established on a base of $3,000 during the first year. For the second year, the maintenance cost increases to $5,000. Due to changes in technology, the company expects to sell the machinery at the end of the second year for $500,000. With this machine you can have a monthly savings of $25,000, for salaries and benefits of the employees that the machine will replace. For the second year, the savings will be an additional 20%. The company typically uses an opportunity cost of 25% for investments of this type.
According to the previous case, answer the following questions
Is it advisable to purchase this machinery? Show all your calculations.
Expert Answer:
To determine whether it is advisable to purchase the machinery we need to calculate the net present ... View the full answer
