AB Company is considering the purchase of a machine that promises to reduce operating costs by the same amount for every year of its six-year useful life. The machine will cost $83,150 and has no salvage value. The machine has a 20% internal rate of return. (Ignore income taxes in this problem.)

Required:

What is the annual cost savings promised by the machine?

Question

Required:

What is the annual cost savings promised by the machine?

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The Answer of AB Company is considering the purchase of a machine that promises to reduce operating costs by the same amount for every year of its six-year useful life. The machine will cost $83,150 and has no salvage value. The machine has a 20% internal rate of return. (Ignore income taxes in this problem.)

Required:

What is the annual cost savings promised by the machine?

AB Company Is Considering the Purchase of a Machine That