Should able plastics buy the removal equipment

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Reference no: EM132162947

Question: Able Plastics, an injection-molding firm, has negotiated a contract with a national chain of department stores. Plastic pencil boxes are to be produced for a 2-year period. Able Plastics has never produced the item before and requires all new dies. If the firm invests $67,000 for special removal equipment to unload the completed pencil boxes from the molding machine, one machine operator can be eliminated. This would save $26,000 per year. The removal equipment has no salvage value and is not expected to be used after the 2-year production contract is completed. The equipment, although useless to Able, would be serviceable for about 15 years. What is the payback period? Should Able Plastics buy the removal equipment?

Reference no: EM132162947

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