Question

You've bought a new machine for $123,000 to make parts for a computer. You expect to sell product made on with it for $10 per unit. The life of the machines is 10 years. How many units per year must you sell to earn a 10% return on your investment

Answer 1

Answer:

It will need to sale 2,002 units per year to achieve a 10% return on the machine

Explanation:

We will calculate the amount of sales in dollars. We will think this as an annuity which present values is 123,000. That way the company will achieve a 10% return on the machine:

$PV \div \frac{1-(1+r)^{-time} }{rate} = C$

PV  $123,000.00

time      10 years

rate     10% = 0.1

$123,000 \div \frac{1-(1+0.1)^{-10} }{0.1} = C$

C 20,017.68

Now, we divide the cuota by the price per unit to get the units sales per year:

20,017.68 / 10 = 2,001.76 = 2,002 units