A plant costs PKR 860,000 now requires PKR 86,000 annually to maintain and has salvage value of Rs. 258,000 at the end of eight years. The business can generate additional revenue for Rs. 50,000 per annum by installing new plant. Your time value of money is 9%. Please advise the business should install new plant or not?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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2(e) A plant costs PKR 860,000 now requires PKR 86,000 annually to maintain and has salvage value of Rs. 258,000 at the end of eight years. The business can generate additional revenue for Rs. 50,000 per annum by installing new plant. Your time value of money is 9%. Please advise the business should install new plant or not?

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