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Answer these.Take your time and go slow. c) The following costs Table Q2(c) are estimated for two machines: [6] Table Q 2(c) Costs Machine A
Answer these.Take your time and go slow.
c) The following costs Table Q2(c) are estimated for two machines: [6] Table Q 2(c) Costs Machine A Machine B Fixed cost $ 20,000 $ 25,000 Annual maintenance cost $ 6,00 $ 4,00 Annual labor cost $ 13,000 $ 9,000 $ 2,700 Annual extra income taxes Salvage value $3,000 $ 5,000 Life, years 4 6 i. Determine which machine should be selected if the minimum required rate of return is 12% per year. ii. Assume the company is planning to get out of the business in 3 years. At that time, the company expects to be able to sell machine A for $ 15,000 and machine B for $ 22,000. All other costs are expected to remain same. Which machine should the company purchase under these conditions? c) The following costs Table Q2(c) are estimated for two machines: [6] Table Q 2(c) Costs Machine A Machine B Fixed cost $ 20,000 $ 25,000 Annual maintenance cost $ 6,00 $ 4,00 Annual labor cost $ 13,000 $ 9,000 $ 2,700 Annual extra income taxes Salvage value $3,000 $ 5,000 Life, years 4 6 i. Determine which machine should be selected if the minimum required rate of return is 12% per year. ii. Assume the company is planning to get out of the business in 3 years. At that time, the company expects to be able to sell machine A for $ 15,000 and machine B for $ 22,000. All other costs are expected to remain same. Which machine should the company purchase under these conditionsStep by Step Solution
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