Question

In: Accounting

Your company's MARR is 9%.. Your boss wants to buy a new piece of rental equipment...

Your company's MARR is 9%.. Your boss wants to buy a new piece of rental equipment - a snow making machine - which she plans to rent to local ski clubs. The estimated cost of the machine is $55,000 and the annual O&M is $6000. She expects to rent the machine at $16,000 per season for 7 seasons, at which time Global Warming will end the ski industry. However the snow machine can be sold as an antique at an estimated price of $20,000.
A. Does this sound like a good investment? [copy the pertinent value before you start part B.]
B. You mention to boss that it does not sound bad, but the salvage value sounds too high. She asks you to find the value of the salvage value at which the investment will just break even.

Solutions

Expert Solution

Net Cash Inflow = Rent the machine at $16,000 - O&M is $6000 = $ 10,000

ekkarill92 answered 1 year ago
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