Question
A company is studying the acquisition of machinery to package production at a cost of $800,000. To achieve the maximum level of machine efficiency, a
A company is studying the acquisition of machinery to package production at a cost of $800,000. To achieve the maximum level of machine efficiency, a certain degree of maintenance is necessary. The cost for this is established on a base of $3,000 during the first year. For the second year, the maintenance cost increases to $5,000. Due to changes in technology, the company expects to sell the machinery at the end of the second year for $500,000. With this machine you can have a monthly savings of $25,000, for salaries and benefits of the employees that the machine will replace. For the second year, the savings will be an additional 20%. The company typically uses an opportunity cost of 25% for investments of this type.
According to the previous case, answer the following questions
Is it advisable to purchase this machinery? Show all your calculations.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To determine whether it is advisable to purchase the machinery we need to calculate the net present ...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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