A new machine that will lead to savings in labour costs of $20,000 per year can be purchased for $60,000. However, it will cost $2000 per year for the first four years and $3000 per year for the next four years to service and maintain the machine. In addition, its annual fuel consumption will cost $1500. After a service life of eight years, the salvage value of the machine is expected to be $10,000. Should the machine be acquired if the company requires a minimum annual rate of return on investment of 15%?

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The Answer of A new machine that will lead to savings in labour costs of $20,000 per year can be purchased for $60,000. However, it will cost $2000 per year for the first four years and $3000 per year for the next four years to service and maintain the machine. In addition, its annual fuel consumption will cost $1500. After a service life of eight years, the salvage value of the machine is expected to be $10,000. Should the machine be acquired if the company requires a minimum annual rate of return on investment of 15%?

A New Machine That Will Lead to Savings in Labour