ABC Manufacturing Company is planning to reduce its labor costs by automating a critical task that is currently performed manually. The automation requires the installation of a new machine. The cost to purchase and install a new machine is 15,000. The installation of machine can reduce annual labor cost by 4,200. The life of the machine is 15 years. The salvage value of the machine after fifteen years will be zero. The required rate of return of Smart Manufacturing Company is 25%. Should Smart Manufacturing Company purchase the machine?
ABC Manufacturing Company is planning to reduce its labor costs by automating a critical task that is currently performed manually. The automation requires the installation of a new machine. The cost to purchase and install a new machine is 15,000. The installation of machine can reduce annual labor cost by 4,200. The life of the machine is 15 years. The salvage value of the machine after fifteen years will be zero. The required rate of return of Smart Manufacturing Company is 25%. Should Smart Manufacturing Company purchase the machine?
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
Section: Chapter Questions
Problem 1PS
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ABC Manufacturing Company is planning to reduce its labor costs by automating a critical task that is
currently performed manually. The automation requires the installation of a new machine. The cost
to purchase and install a new machine is 15,000. The installation of machine can reduce annual labor
cost by 4,200. The life of the machine is 15 years. The salvage value of the machine after fifteen years
will be zero. The required rate of return of Smart Manufacturing Company is 25%. Should Smart Manufacturing Company purchase the machine?
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