A business firm is considering purchasing equipment that will reduce their annual operating costs by $46,000. The equipm

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A Business Firm Is Considering Purchasing Equipment That Will Reduce Their Annual Operating Costs By 46 000 The Equipm 1 (160.03 KiB) Viewed 13 times

A business firm is considering purchasing equipment that will reduce their annual operating costs by $46,000. The equipment costs $210,000 and has a residual value of $21,000 at the end of its useful life of 8 years. The annual maintenance cost is $9,000. While not in use by the firm, the equipment can be rented to other companies to generate an average income of $14,000 per year. If the cost of money is 12% compounded annually, would you recommend the purchase of the said equipment? Justify your answer using the applicable project assessment tools discussed in the class.