Question
In: Economics
You have purchased a machine costing $27 comma 00027,000. The machine will be used for two...
You have purchased a machine costing
$27 comma 00027,000.
The machine will be used for two years, and at the end of this time, its salvage value is expected to be
$12 comma 00012,000.
The machine will be used
4 comma 0004,000
hours during the first year and
6 comma 0006,000
hours during the second year. The expected annual net savings will be
$34 comma 00034,000
during the first year and
$40 comma 00040,000
during the second year. If your interest rate is
1414%,
what would be the equivalent net savings per machine hour?
Solutions
Expert Solution
Given data:
Cost of machine = $27,000
Useful life = 2 years
Salvage value = $12,000
Usage in 1st year = 4000 hours
Usage in 2nd year = 6000 hours
Savings in 1st year = $34,000
Savings in 2nd year = $40,000
Interest Rate = 14% = 0.14
Net savings per machine per hour = Net present value / Total usage
=42836.87/(4000+6000) = $4.28 per machine hour
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Rahul Sunny answered 8 months agoRelated Solutions
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