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Ahmad has inherited a family business of producing sodas. In his newly managing company, he has a machine (Super-Soda-Maker 2000) that can produce 500 cans
Ahmad has inherited a family business of producing sodas. In his newly managing company, he has a machine (Super-Soda-Maker 2000) that can produce 500 cans of soda per hour. This machine requires maintenance every year with a cost of $125,000 and increasing by $50,000 each year starting at year 3. Ahmad is deciding whether to retire 10 years from now, or 5 years from now. If he retires 10 years from now he can sell the machine for $20,000 but if he chooses to retire 5 years from now he can sell the machine for $55,000. Each can of soda is sold at $0.89. The company operates for 8 hours per day, and after considering holidays and vacations, the company works only for 200 days per year. All other operating expenses like salaries, rent, electricity, taxes, etc. are fixed costs estimated to be $100,000 per year regardless of when he will retire. MARR = 10%. a) Should Ahmad retire in 5 years or in 10 years? Show your work. Explain why
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