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Answer B 3
Calculated as
Extra cost in buying machine B = $60000-$52000 = $8000
Which will be recovered in 3 years as calculated belwo
Year | Machine A | Machine B | Incremental Saving | Cummulative Savings |
1 | $ (6,000) | $ (7,000) | $ (1,000) | $ (1,000) |
2 | $ (8,000) | $ (4,000) | $ 4,000 | $ 3,000 |
3 | $ (8,000) | $ (3,000) | $ 5,000 | $ 8,000 |
4 | $ (8,000) | $ (3,000) | $ 5,000 | $ 13,000 |
5 | $ (6,000) | $ (3,000) | $ 3,000 | $ 16,000 |
6 | $ (5,000) | $ (2,000) | $ 3,000 | $ 19,000 |
7 | $ (4,000) | $ (2,000) | $ 2,000 | $ 21,000 |
Period 3% 4% 0.971 0.943 0.915 0.888 0.863 0.837 0.813 0.789 5% 0.952 0.907 0.864 0.823...
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