A construction company has identified two machines that will accomplish the same job. The Caterpillar model costs $160,000 and has a service life of eight years if it receives a $30,000 overhaul every two years. The International model costs $210,000 and should last 12 years with a $20,000 overhaul every three years. In either case, the overhaul scheduled for the year of disposition would not be performed, and the machine would be sold for about $20,000. If the company's cost of capital is 12%, which machine should be purchased?

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The Answer of A construction company has identified two machines that will accomplish the same job. The Caterpillar model costs $160,000 and has a service life of eight years if it receives a $30,000 overhaul every two years. The International model costs $210,000 and should last 12 years with a $20,000 overhaul every three years. In either case, the overhaul scheduled for the year of disposition would not be performed, and the machine would be sold for about $20,000. If the company's cost of capital is 12%, which machine should be purchased?

A Construction Company Has Identified Two Machines That Will Accomplish