Business, 21.06.2020 01:57, katherinevandehei
A new engineer is proposing that the old machine be replaced with a new one that costs $165,000. This new machine will last 5 years with 10% salvage. This new machine will require only one operator, and will operate on a productive basis 384 minutes per day. This new machine will operate faster, with a production rate of .3200 minutes per part. Maintenance costs for this machine are expected to be 0 the first year, $8,000 the second, and increase by 7% each year thereafter. Overhead rates, inflation rates, and tax rates are the same as in part one. Depreciation will be 7 year MACRS. Up to 25% of the money for this new machine could be borrowed. Management wants to know what the maximum interest rate on borrowed money that would make it worthwhile to borrow, and what is the best repayment plan. Management also wants to know if the maximum interest rate is a function of the repayment plan. Use IRR techniques to determine under what conditions this machine should be purchased
Answers: 3
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A new engineer is proposing that the old machine be replaced with a new one that costs $165,000. Thi...
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