2. Able Plastics, an injection-molding firm, has negotiated a contract with a national chain of department stores. Plastic pencil boxes are to be produced for a 2-year period. If the firm invests $58,000 for special removal equipment to unload the completed pencil boxes from the molding machine, one machine operator can be eliminated saving $33,000 per year. The removal equipment has no salvage value and is not expected to be used after the 2-year production contract is completed. The equipment would be serviceable for about 15 years. a. What is the simple payback period? b. Would you recommend to Able Plastics? Should they buy the machine?

2. Able Plastics, an injection-molding firm, has negotiated a contract with a national chain of department stores. Plastic pencil boxes are to be produced for a 2-year period. If the firm invests $58,000 for special removal equipment to unload the completed pencil boxes from the molding machine, one machine operator can be eliminated saving $33,000 per year. The removal equipment has no salvage value and is not expected to be used after the 2-year production contract is completed. The equipment would be serviceable for about 15 years. a. What is the simple payback period? b. Would you recommend to Able Plastics? Should they buy the machine?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter1: Introduction And Goals Of The Firm

Section: Chapter Questions

Problem 2.2CE

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