The benefits from ownership are identical

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Reference no: EM13766833

You are asked to evaluate two machines. The benefits from ownership are identical. Machine A costs $300 to buy and install, lasts for 5 years, and costs $160 per yea to operate. Machine B costs $500, lasts for 7 years, and costs $120 per year to operate. Both machines have 0 salvage. Assuming that the machines will be replaced in perpetuity when they wear out, which machine do you recommend if the cost of capital is 15%?

a. Machine A

b. Machine B

c. Can’t be determined

d. Two machines are identical

Reference no: EM13766833

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