The management of Polymer Corporation, a plastics manufacturer, is considering the purchase of machinery that would cost
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Question:
The management of Polymer Corporation, a plastics manufacturer, is considering the purchase of machinery that would cost $450,000 and have no salvage value at the end of its 15 year useful life. The company estimates the following annual costs and revenues associated with the machine: Revenues $250,000 Expenses: Maintenance $40,000 Depreciation $30,000 Insurance $30,000 Salary $130,000 Total Expenses $230,000 Required: If the company will not purchase the machinery unless it provides a payback period of six years or less should the purchase be made? What is the simple rate of return on this investment?
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