Two scenarios for acquiring a machine for a project

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Compare the two scenarios for acquiring a machine for a project for 20 years expected operations, at a company with an internal rate of return of i = 12%. Which scenario is better? Please round to the nearest $.

1. Buy an initial small machine at $12,000, it cost $2,400/year to run for the first 10 years, buy a second larger machine at $28,000 and run it for 10 years at a cost of $4,000/year. There is no salvage value at the end of service for either machine.

2. Buy a large machine for $30,000 and run it for 20 years at a cost of $1,000/year. At the end of the 20 years, the machine is assumed to have a salvage value of $10,000.

Reference no: EM131635740

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