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Which machine should be chosen

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Suppose you need to choose between two machines. The first one will cost $80,000, will have an economic life of 4 years and zero salvage. Annual maintenance costs would be $10,000. The other alternative would cost $130,000, would have an economic life of 6 years, and a 90,000 salvage value. The annual maintenance would cost $11,000. Both alternatives would have a CCA rate of 30%. The cost savings are expected to be the same. Which machine should be chosen (assume a discount rate of 14% and a tax rate of 35%)?

Reference no: EM132396511

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