Justify the purchase of the new machines

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Reference no: EM13243609

Your company is considering the purchase of new earth movingequipment. The total purchase is $240,000 and we pay with $100,000 cash and borrow therest. (12% per year nominal, compounded monthly for 5 years). The machines last for 7years and will be worth $35,000 at the end of 7 years. The machines will saveapproximately $20 per ton of dirt moved. Operating costs for the equipment are $500 per month.At the end of year 3, you will have to do an overhaul and that costs $30,000. Assume thatMARR is 1.5% per
month and ignore the effect of taxes and depreciation.

Set up the equation and solve for the break even monthly tons of dirt moved to justify the purchase of the new machines

Reference no: EM13243609

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