You can continue to use your less efficient machine at a cost of $8,000 annually for the next five years.Alternatively, you can purchase a more efficient machine for $12,000 plus $5,000 annual maintenance.At a cost of capital of 15 percent, 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 five years.Alternatively, you can purchase a more efficient machine for $12,000 plus $5,000 annual maintenance.At a cost of capital of 15 percent, 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