Answered step by step
Verified Expert Solution
Question
1 Approved Answer
What option would be best? Both at 5% Interest Option 1 Company is considering an $80,000 investment in new machinery, it will trade in the
What option would be best?
Both at 5% Interest
Option 1
Company is considering an $80,000 investment in new machinery, it will trade in the old machine for $5,000, and will immediately pay $3000 for training costs.
Useful life of 5 years with a salvage value of $4,000
Expectation is that the new machine will result in a one time savings of $12,000 at the end of year one due to improved parts management. Second they will have an annual savings of $21,500
Option 2
- Purchase another Delivery Truck
- Will allow it to expand marketing area & increase revenue by $69,000 per year
- $115,000 truck, 5 year life, $30,000 salvage
- Immediate increase of $5000 of working capital needed
- $32,000 a year increase in salary, taxes,. (every year)
- $20,000 maintenance on the truck at end of 3rd year
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started