A firm is considering the purchase of a machine which will cost £20,000. It is estimated that

A firm is considering the purchase of a machine which will cost £20,000. It is estimated that annual savings of

£5,000 will result from the machine’s installation, that the life of the machine will be five years, and that its residual value will be £1,000. Assuming the required rate of return to be 10 per cent, what action would you recommend?

 

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