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A company is considering investing in a machine with a capital cost of ksh 300,000witha useful life of 4 years.Annual running costs are expected to
A company is considering investing in a machine with a capital cost of ksh 300,000witha useful life of 4 years.Annual running costs are expected to amount to ksh276,000 including straight line depreciation of ksh 70,000 per annum.it is estimated that the machine can be disposed of at its net book value at end of its life.The capacity of the machine will be 6 million items for the first two years but this will fall to 5 million items in years 3 and 4.It is estimated that the company will be able to sell whatever the machine produces.The average contribution is ksh 60 per 1000 units.what is the payback period for the machine (i)1.92 years (ii)0.94 years (iii)2.09 years (IV)1.94 years
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