Both machines will use straight-line depreciation method

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OM Construction Company must choose between two types of cranes. Crane A costs $600,000, will last for 5 years, and will require $60,000 in maintenance each year. Crane B costs $750,000, will last for 7 years, and will require $50,000 in maintenance each year. Maintenance costs for cranes A and B are incurred at the end of each year. Both machines will use straight-line depreciation method and no salvage value is scheduled or expected. The tax rate of the company is 35% and the opportunity cost of capital is 12% per year, which machine should OM Construction purchase?

Reference no: EM131927446

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