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laundry processed 120 kg & is expected  to grow to 132 kg. This growth will continue at the same percentage rate for next 7years . Currently hospital ,  is considering two options, the purchase of machine A or the rental of machine B. given information: Machine A – purchase Annual capacity  £180  Material cost per kilogram £2 Labour cost per kilogram £3 Fixed costs per annum £20  Life of machine 3 years Capital cost £60  Depreciation per annum £20  Machine B – rent Annual capacity (kilograms) £170  Material cost per kilogram £1.8 Labour cost per kilogram £3.4 Fixed costs per annum £18  Rental per annum £20  Rental agreement 3 years Depreciation per annum nil 1. The hospital is able to call on an outside laundry if there is either a breakdown. The charge would be £10 per kilogram of washing. 3. Machine A will have no residual value at any time. 4. Present machine can be sold £10  cash 6. discount rate is 15%. (a) evaluate the two options for operating the laundry, using discounted cash flow techniques;

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