new medical laser machine

Consider the following scenario:

A Saudi Arabian hospital bought a new medical laser machine for 2,812,500 Saudi riyals (SAR). The machine will generate a cashflow of 562,500 SAR for six years, which is the expected useful life starting Year 1. The cost of capital is 8 percent. The expected salvage value for each year is shown below:

Year

Salvage Value (in Saudi riyals – SAR)

0

2,812,500

1

2,250,000

2

1,687,500

3

937,500

4

375,000

5

93,750

6

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