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It costs a plant P2000 a day caused by a shutdown of its equipment. Past records...

It costs a plant P2000 a day caused by a shutdown of its equipment. Past records show an average of 3 days shutdown each year. To avoid shutdowns, it is proposed to purchase a standby machine for P25000 which is expected to have a service life of 12 years with 5,000 salvage value at the end of this time. Annual maintenance and operation for 3 days would cost P1200. Would it pay to buy the standby machine if the minimum rate required rate of return is 15%?

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organization should continue with existing setup

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