Question

( [8] ) A machine can be purchased for
50,000. Machine will contribute
- 12,000 per year for the next five
years. Assume borrowing cost is
10% per annum. Determine whether
machino should be purchased or
not:
(a) Should be purchased
(b) Should not bo purchased
(c) Can't say about purchase
(d) None of the above​

Answer 1

Answer:

(a) Should be purchased

Step-by-step explanation:

• this is because the borrowing charge is 10% p.a. which means ₹5,000 each year
• and machine will contribute ₹12,000 each year
• so the profit for each year is ₹12,000 - ₹5,000 = ₹7,000
• hence total profit is ₹35,000