Question
The Advanced Technology Corporation(ATC)makes customisedrobotic machine that can be purchased for $100,000. Max Manufacturing Ltd.has determined that it needs a new machine and theATCmodel will
The Advanced Technology Corporation(ATC)makes customisedrobotic machine that can be purchased for $100,000. Max Manufacturing Ltd.has determined that it needs a new machine and theATCmodel will save $60,000 per year for Max Manufacturing Ltd., by reducing human resource costfor the next 5 years. Max Manufacturing Ltd. has a corporate tax of 21%. Assume that 5 years straight line depreciation is used for the roboticmachine and the machine will be worthless after 5 years. ExcelLeasing Corporation has offered to lease the same pipe-boring machine to Max Manufacturing Ltd. for $25,000 per year for 5 years. Cost of borrowing is 6.329%.Determinefor Max Manufacturing Ltd.to buy or leasethe customised robotic machine.
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