Question: Please show work. You purchase a machine for $50,000 now, with a salvage value of $12,000 in 10 years. The machine will have O&M costs
You purchase a machine for $50,000 now, with a salvage value of $12,000 in 10 years. The machine will have O&M costs and cost of raw goods totaling $25,000 per year. The machine will produce 3,200 high-quality parts per year. If i = 10% annual rate compounded annually, what is the cost per high-quality part produced? You can choose between two purchases: Machine A or Machine B. Machine A costs $20,000 and has a salvage value of $6,000 after 4 years. Machine B costs $28,000 and has a salvage value of $4,000 after 5 years. You can lease a Machine B equivalent for $5,000 per year, if you initially purchased Machine B. You need a machine for a total of 8 years, and can purchase a new machine in the future at the same price with the same salvage value. If i is 10% annual rate compounded annually, which machine should be purchased? Show work and justify
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
