Choosing between two pieces of equipment

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Reference no: EM132001367

ElectroFlow, Inc. is choosing between two pieces of equipment. The first choice costs $50,000 and will last five years. It will be depreciated using the straight line depreciation method and will have no salvage value. It will have an annual maintenance cost of $5,000. The second choice will cost $90,000 and will last fifteen years. It will also be depreciated using the straight line depreciation method and will have no salvage value. It will have an annual maintenance cost of $4,500. The discount rate is 4% and the tax rate is 35%. Which machine should be chosen and what assumptions underlie that choice?

Reference no: EM132001367

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