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Which is the better for the firm

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Reference no: EM13280210

You are considering the purchase of one of two machines used in your manufacturing plant. Machine A has a life of two years, costs $1000 initally, and then $300 per year in maintenance costs. Machine B costs $1300 initially, has a life of three years, and requires $200 in annual maintenace costs. Either machine must be replaced at the end of its life with an equivalent machine. Which is the better for the firm? The discount rate is 8% and the tax rate is zero.

Reference no: EM13280210

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