You want to buy a new machine. It's going to cost $200,000 and have a salvage value of $15,000 after 7 years. Annual operating costs are $75,000. It also costs $5000 a year to employ an operator for the machine. If at year 0 you sell your current machine for $3,000 and purchase the new machine, how much will you need to generate in revenue to make a 12% rate of return?

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 10PA: The Ham and Egg Restaurant is considering an investment in a new oven that has a cost of $60,000,...
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Question #4:
You want to buy a new machine. It's going to cost $200,000 and have a salvage value of $15,000
after 7 years. Annual operating costs are $75,000. It also costs $5000 a year to employ an
operator for the machine. If at year 0 you sell your current machine for $3,000 and purchase the
new machine, how much will you need to generate in revenue to make a 12% rate of return?
Transcribed Image Text:Question #4: You want to buy a new machine. It's going to cost $200,000 and have a salvage value of $15,000 after 7 years. Annual operating costs are $75,000. It also costs $5000 a year to employ an operator for the machine. If at year 0 you sell your current machine for $3,000 and purchase the new machine, how much will you need to generate in revenue to make a 12% rate of return?
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