Question
The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $71,000. The machine would replace an old piece of equipment
The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $71,000. The machine would replace an old piece of equipment that costs $18,000 per year to operate. The new machine would cost $8,000 per year to operate. The old machine currently in use could be sold now for a scrap value of $26,000. The new machine would have a useful life of 10 years with no salvage value. |
Required: |
Compute the simple rate of return on the new automated bottling machine. |
The management of Kunkel Company is considering the purchase of a $40,000 machine that would reduce operating costs by $9,500 per year. At the end of the machines five-year useful life, it will have zero scrap value. The companys required rate of return is 13%. |
Required: | |||
1. | Determine the net present value of the investment in the machine.
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