An engineer at the XYZ Company has identified a piece of equipment that can be purchased...
An engineer at the XYZ Company has identified a piece of equipment that can be purchased for $1,250,500. The machine has an estimated useful life of four years. The cost of capital (discount rate) for a project with this risk profile if 11.5%. What annual labor savings must this machine generate in order to justify the purchase price?
Homework Answers
Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate
1,250,500=Annuity[1-(1.115)^-4]/0.115
1,250,500=Annuity*3.0696138
Annuity=1,250,500/3.0696138
=$407380.24(Approx)
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An engineer at the XYZ Company has identified a piece of
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