Suppose a new cost-saving device will generate $1,000 net savings per year to a firm.The device costs $10,000.Should the firm purchase the device?

Question

Quizplus · Accepted Answer

To determine whether the firm should purchase the device or not, we need to consider the payback period and the present value of the net savings. If the payback period is short and the present value of the net savings is greater than the cost of the device, then it would be a good investment. If not, it may not be worth it. Therefore, we need more information about the payback period and the discount rate to determine whether the investment is worthwhile.

Suppose a New Cost-Saving Device Will Generate $1,000 Net Savings