Q3. You have purchased a machine costing $40 000. The machine will be used for two years, and at the end of this time, its salvage value is expected to be $20 000. The machine will be used 6 000 hours during the first year and 8 000 hours during the second year. The expected annual net savings will be $45 000 during the first year and $52 000 during the second year. If your interest rate is 12%, what would be the equivalent net savings per machine hour? (Hint: Calculate Capital recovery cost and then net annual saving and finally equivalent net savings per machine hour.)
Q3. You have purchased a machine costing $40 000. The machine will be used for two years, and at the end of this time, its salvage value is expected to be $20 000. The machine will be used 6 000 hours during the first year and 8 000 hours during the second year. The expected annual net savings will be $45 000 during the first year and $52 000 during the second year. If your interest rate is 12%, what would be the equivalent net savings per machine hour? (Hint: Calculate Capital recovery cost and then net annual saving and finally equivalent net savings per machine hour.)
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 13EA: Jullo Company is considering the purchase of a new bubble packaging machine. If the machine will...
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![Q3. You have purchased a machine costing $40 000. The machine will be used for two years, and at the
end of this time, its salvage value is expected to be $20 000. The machine will be used 6 000 hours during
the first year and 8 000 hours during the second year. The expected annual net savings will be $45 000
during the first year and $52 000 during the second year. If your interest rate is 12%, what would be the
equivalent net savings per machine hour?
(Hint: Calculate Capital recovery cost and then net annual saving and finally equivalent net savings per
machine hour.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc5c10dfd-fb58-4008-bde2-58cd9cfc5a72%2F5d66e183-1f09-4921-aebd-b535b2478529%2F0ns2nyp_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Q3. You have purchased a machine costing $40 000. The machine will be used for two years, and at the
end of this time, its salvage value is expected to be $20 000. The machine will be used 6 000 hours during
the first year and 8 000 hours during the second year. The expected annual net savings will be $45 000
during the first year and $52 000 during the second year. If your interest rate is 12%, what would be the
equivalent net savings per machine hour?
(Hint: Calculate Capital recovery cost and then net annual saving and finally equivalent net savings per
machine hour.)
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