Which machine should be sold

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Reference no: EM133327292

Question: Emeralds Manufacturers ltd has two machines doing similar works. Due to improved processing and manufacturing, the company is in a position to sell one of the machines.

Machine Q currently needs repairing costing Kes. 100,000 to be operative for the next threer years. It's annual operating costs are expected to be Kes, 125,000 and it could be sold for Kes. 80,000 at the end of year 3. Machine P is expected to have a market value of Kes.

100,000 at the end of year 6. It's annual operating costs are Kes. 90,000 and would require repairs costing Kes. 120,000 at the end of 3 years. Assume that the required rate of return is 10%. Which machine should be sold?

Reference no: EM133327292

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