You can continue to use your less efficient machine at a cost of $8,000 annually for the next 5 years.Alternatively,you can purchase a more efficient machine for $12,000 plus $5,000 annual maintenance.At a cost of capital of 15%,you should:
A) Buy the new machine and save $600 in equivalent annual costs.
B) Buy the new machine and save $388 in equivalent annual costs.
C) Keep the old machine and save $388 in equivalent annual costs.
D)Keep the old machine and save $580 in equivalent annual costs.

Question

Quizplus · Accepted Answer

The Answer of You can continue to use your less efficient machine at a cost of $8,000 annually for the next 5 years.Alternatively,you can purchase a more efficient machine for $12,000 plus $5,000 annual maintenance.At a cost of capital of 15%,you should:
A) Buy the new machine and save $600 in equivalent annual costs.
B) Buy the new machine and save $388 in equivalent annual costs.
C) Keep the old machine and save $388 in equivalent annual costs.
D)Keep the old machine and save $580 in equivalent annual costs.

You Can Continue to Use Your Less Efficient Machine at a Cost