Shandling Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost ($200,000)
Question:
Shandling Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost \($200,000\) and has an estimated useful life of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annual cash inflows of \($33,000\). Management also believes that the new bottling machine will save the company money because it is expected to be more reliable than other machines, and thus will reduce downtime. How much would the reduction in downtime have to be worth in order for the project to be acceptable? Assume a discount rate of 9%. (Hint: Calculate the net present value.)
Step by Step Answer:
Managerial Accounting Tools For Business Decision Making
ISBN: 9780471413653
2nd Canadian Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly