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.)
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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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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