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Posted by: alice konlan
Price Quoted by Student: $0
Posted On: 2020-03-28 01:01:35
 
Question
There are four machines in Inco Engineering Subsidiary. One out of the four machines is under contemplation for a possible replacement. A novel machine costs GHC 75,000. This amount involves a comprehensive guarantee of the maintenance costs for year one and year two. The amount will also cater for a large share of the maintenance costs for year three and year four. The maintenance costs and salvage value are given as follows: Old Machine Novel Machine Salvage Value Maintenance Salvage Value Maintenance Year at End of Year Costs at End of Year Costs 0 GHC 18,000 GHC - GHC 75,000 GHC - 1 15,000 7,500 73,000 0 2 12,000 7,600 68,000 0 3 9,000 7,700 64,000 1,200 4 5,000 7,800 60,000 2,800 Qn. Assuming the novel and old machines have parallel energy and productivity costs, should the machine be replaced this year by Inco Engineering Subsidiary? [Hint: minimum attractive rate of return equals 8%].

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