A company owns a machine that is currently lying unused in the factory. The machine was bought five years ago at a cost of C60000 and has now been depreciated down to a book value of C10000. It could be sold now for \pm 3000. Alternatively, it could be rented out for a year at E2,500. The company's chief engineer believes the machine will be totally obsolete in 12 months' time and would then have a scrap value of \pm 800. The company is considering using the machine to undertake a one-year project. If it did, the machine's scrap value at the end of the year, net of dismantling costs, would be zero. Ignoring the time value of money, what is the cost of using the machine on the project

A company owns a machine that is currently lying unused in the factory. The machine was bought five years ago at a cost of C60000 and has now been depreciated down to a book value of C10000. It could be sold now for \pm 3000. Alternatively, it could be rented out for a year at E2,500. The company's chief engineer believes the machine will be totally obsolete in 12 months' time and would then have a scrap value of \pm 800. The company is considering using the machine to undertake a one-year project. If it did, the machine's scrap value at the end of the year, net of dismantling costs, would be zero. Ignoring the time value of money, what is the cost of using the machine on the project

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

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