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Khumalo Ltd's existing machine has two years of use remaining. Based on a discount rate of 13%, the total year-end costs to the firm of
Khumalo Ltd's existing machine has two years of use remaining. Based on a discount rate of 13%, the total year-end costs to the firm of keeping the machine for another one or two years, will be R55000 and R70000, respectively. The proposed new machine has a lifespan of three years, and a present value of total costs of R125000 based on the same discount rate. When should Khumalo Ltd replace the old machine?
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