Question
Company X has been contracting its overhauling work to Company Y for $31,000 per machine per year. Company X estimates that by building a $406,000
"Company X has been contracting its overhauling work to Company Y for $31,000 per machine per year. Company X estimates that by building a $406,000 maintenance facility with a life of 13 years and a salvage value of $67,000 at the end of its life, it could handle its own overhauling at a cost of only $12,000 per machine per year. What is the minimum annual number of machines (as an integer) that Company X must operate to make it economically feasible to build its own facility? (Assume an interest rate of 10%.) Hint: calculate the annual equivalent cost of the maintenance facility."
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