Determining the annual operating costs

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The furniture division of Plyafun Ltd, a profitable, diversified company, purchased a machine 5 years ago for $75000. When it was purchased the machine had an expected useful life of 15 years and an estimated value of zero at the end of its life. The machine currently has a market value of $10000. The division manager reports that the he can buy a new machine for $160000 (including installation) which, over its 10-year life, will result in an expansion of sales from $100000 to $110000 per annum. In addition, it is estimated that the new machine will reduce annual operating costs from $70000 to $50000. If the required rate of retunes is 10 percent per annum, should Playfun buy the new machine?

Reference no: EM132524089

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