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Economics

The Johnson Company pays $2000 a month to a trucker to haul wastepaper and cardboard to the city dump. The material could be recycled if the company were to buy a $60,000 hydraulic press baler and spend $30,000 a year for labor to operate the baler. The baler has an estimated useful life of 30 years and no salvage value. Strapping material would cost $2000 per year for the estimated 500 bales a year that would be produced. A wastepaper company will pick up the bales at the plant and pay Johnson $23 per bale for them. Use an annual cash flow analysis in working this problem.

(a) If interest is 8%, is it economical to install and operate the baler?

(b) Would you recommend that the baler be installed?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M92634976

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