Question
A company is analyzing buying an assembly machine at a price of $ 800,000USD and a monthly maintenance cost of $ 3,000usd during the first
A company is analyzing buying an assembly machine at a price of $ 800,000USD and a monthly maintenance cost of $ 3,000usd during the first year and $ 5,000usd during the second year and at the end of this time it may be sold for the sum of half a million of dollars. With this machine you can avoid hiring an employee who earns $ 25,000usd per month and for the second year will have to increase his salary by 20%. If the factory normally earns 3.5% cash monthly on all its investments. a) Is it advisable to purchase it? b) If in the previous item it is assumed that the machine will work for 7 years and that each year the monthly maintenance cost is increased by $ 2,000usd and that at the end of this time the machine will have no salvage value. Would the previous decision be upheld if the employee's salary is increased every year by 25%?
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