The manager of automated products is contemplating the purchase of a new machine that will cost...
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The manager of automated products is contemplating the purchase of a new machine that will cost Kshs. 300,000 and has a useful life of five years: The machine will yield (year-end) cost reductions to Automated Products of Kshs. 50,000 in year 1, Kshs. 60,000 in year 2, Kshs. 75,000 in year 3, and Kshs. 90,000 in years 4 and 5. What is the present value of the cost savings of the machine if the interest rate is 8 percent? Should the Manager purchase the machine? [10 Marks] The manager of automated products is contemplating the purchase of a new machine that will cost Kshs. 300,000 and has a useful life of five years: The machine will yield (year-end) cost reductions to Automated Products of Kshs. 50,000 in year 1, Kshs. 60,000 in year 2, Kshs. 75,000 in year 3, and Kshs. 90,000 in years 4 and 5. What is the present value of the cost savings of the machine if the interest rate is 8 percent? Should the Manager purchase the machine? [10 Marks]
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