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

question 108

Multiple Choice

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.