A small industrialist is considering the purchase of a new machine costing UAH 50,000.
This will replace the need to hire sub-contractors to do the necessary work, which costs at present UAH 17,500 per annum. The machine will also do additional jobs in the factory, valued at UAH 6,500 p.a.
The machine costs UAH 12,500 to run and will last for five years only. It has a residual value of UAH 10,000.
Assuming a discount rate of 12%, should the industrialist purchase the machine?