A firm is considering two machines. Machine A costs $500,000 and will save the firm an estimated $85,000 per year for ten years. The salvage value after ten years is $75,000. Machine B costs $900,000 and will save the firm $150,000 per year for five years, and $140,000 per year for the remaining five years. The salvage value after ten years is $200,000. Which machine should the firm purchase if interest is 8.5 % compounded annually?

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The Answer of A firm is considering two machines. Machine A costs $500,000 and will save the firm an estimated $85,000 per year for ten years. The salvage value after ten years is $75,000. Machine B costs $900,000 and will save the firm $150,000 per year for five years, and $140,000 per year for the remaining five years. The salvage value after ten years is $200,000. Which machine should the firm purchase if interest is 8.5 % compounded annually?

A Firm Is Considering Two Machines