Which machine tim should recommend

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Reference no: EM131357008

Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they have the costs shown in the following table. He is told to assume that:

1. The life of each machine is 3 years.

2. The company thinks it knows how to make 12% on investments no more risky than this one.

3. Labor and maintenance are paid at the end of the year.

	Machine A	Machine B
Original cost	$10,000	$20,000
Labor per year	2,000	4,000
Maintenance per year	4,000	1,000
Salvage value	2,000	7,000

Determine, via the present value method, which machine Tim should recommend.

Reference no: EM131357008

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