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What is cost of using the machine on the project

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Question

A company owns a machine that is currently lying unused in the factory. The machine was bought five years ago at a cost of £60 000 and has now been depreciated down to a 'book value' of £10 000. It could be sold now for £3 000. Alternatively, it could be rented out for one year at £2 500. The company's chief engineer believes the machine will be totally obsolete in 12 months' time and would then have a scrap value of £800. The company is considering using the machine to undertake a 1-year project. If it did, the machine's scrap value at the end of the year, net of dismantling costs, would be zero. Ignoring the time value of money, what is the cost of using the machine on the project?

Reference no: EM133227567

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