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Question: Company X has been contracting its overhauling work to Company Y for $44,000 per machine per year. Company X estimates that by building a $492,000 maintenance facility with a life of 20 years and a salvage value of $62,000 at the end of its life, it could handle its own overhauling at a cost of only $10,000 per machine per year. What is the minimum annual number of machines (as an integer) that Company X must operate to make it economically feasible to build its own facility? (Assume an interest rate of 14%.)

Hint: calculate the annual equivalent cost of the maintenance facility.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M92572414

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