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B Co is considering buying a machine, which will reduce the amount of labour employed, saving $10,000 per year in current terms. The first saving will be 1 year from now. The company expects: -inflation in wage rates to be 6% p.a -inflation in general to be 10% p.a -its nominal cost of capital to be 8% If the labour savings are expected to continue to perpetuity, what is the maximum worth spending on the machine? Maximum cost of machine to the nearest $ is: $________. (All workings should be to 1 dp of a %) |