Answer to Question #74223 in Microeconomics for zulfiqar
Lightco Corpn. has just replaced its production machinery with new, more efficient equipment that will reduce annual production costs by 5 Million per year. The cost of the new machines is 288 Million. if the firm uses a discount rate of 8 percent per year, how many years will it take for the firm to recoup its investment?
Annual economic effect: 5 – 0,08*288 = -18.04 (million). Number of years that will recoup the investment: 288/18.04 ≈ 16 (years).