A rice flour mill is seeking to maximize its productivity with an improved grinder. It can repair its existing machinery or buy a new one. For buying purposes, two alternative machines are in consideration. Machine A costs £125,000 but yields a 10 percent savings over the current machine used. Machine B costs £525,000 but yields a 35 percent savings over the current machine used. The repair and maintenance costs of the existing machine are provided in the following table.
a. Which machine should the mill purchase if a discount rate of 13 percent is considered?
b. Assuming the discount rate is reduced to 7 percent, will there be any change in the decision?

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Year 1 2 3 4 5 сл Projected Cost 600,000 615,000 625,000 630,000 650,000