Question

[15 marks] The Department of Engineering is contemplating the purchase of a top-of-the-line PCB drilling machine to be used in its laboratories. The price of the machine is $5,000.The depreciation rate of the machine follows the SL method over its 10 years life. The market value of the machine at the end of its life is estimated to be $1,000. Annual fees paid by students to use the machine are estimated to be $500. What is the interest rate that would make this purchase break even if the Department would sell the machine at EOY 8?(Hint: the market value at EOY 8 is the book value of the machine at the time).

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