J&M Manufacturing plans on purchasing a new assembly machine for $32,000 to automate one of its current
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J&M Manufacturing plans on purchasing a new assembly machine for $32,000 to automate one of its current manufacturing operations. It will cost an additional $3,500 to have the new machine installed. With the new machine, J&M expects to save $12,000 in annual operating and maintenance costs. The machine will last five years with an expected salvage value of $5,000.
(a) How long will it take to recover the investment (plus installation cost)?
(b) If J&M’s interest rate is known to be 17%, determine the discounted payback period.
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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a It will take 3 years to recover the total investment b ...View the full answer
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Jonas Araujo
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