Machines have the same production speed and capacity

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Reference no: EM131186363

Machine A costs $15,000 and will last 5 years, at which time the value of the machine is $5,000 (it is worth $7,000 in 4 years). Machine B costs $12,000 and will last 3 years, after which the machine is worth $4,000. You can lease a Machine B (only if you purchased one initially) for $3,000 per year (payment due at end of year). You need a machine for 4 years, and either machine can be repurchased in the future for the same price. If both machines have the same production speed and capacity, which machine should you purchase (Interest=10% annually, show your work).

Reference no: EM131186363

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