A new machine that will lead to savings in labour costs of $16,000 per year can be purchased for $52,000. However, it will cost $1500 per year for the first four years and $2500 per year for the next four years to service and maintain it. In addition, its annual electrical power consumption will cost $1000. After a service life of eight years, the salvage value of the machine is expected to be $5000. Should the machine be acquired if the company requires a minimum return on investment of 15%?

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The Answer of A new machine that will lead to savings in labour costs of $16,000 per year can be purchased for $52,000. However, it will cost $1500 per year for the first four years and $2500 per year for the next four years to service and maintain it. In addition, its annual electrical power consumption will cost $1000. After a service life of eight years, the salvage value of the machine is expected to be $5000. Should the machine be acquired if the company requires a minimum return on investment of 15%?

A New Machine That Will Lead to Savings in Labour