Replacement machine out right

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Reference no: EM13256400

Using £10 000 of his own money and £15 000 borrowed from the bank at 1% monthly interest, Nigel has purchased asteam-cleaning machine. Using this machine, he restores the facadesof old, soot-covered buildings in London. He can work for ninemonths out of the year - the machine does not work wellduring the winter - and earns £2 000 a month. How muchcan Nigel pay himself per month if he wants to replace the machinebefore it becomes worthless, given that it depreciates at 20% peryear, straight-line depreciation? If he puts money into a sinking fund, it will earn 0.5% monthly interest. Assume that Nigel wouldlike to be debt-free by the time that he replaces the machine, and that he wants to buy the replacement machine out right, rather thantaking out another loan.

Reference no: EM13256400

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