Question: A mechanical workshop has two different machines used for forging. Both the machines perform to a similar degree of same accuracy. Machine A costs $10,000

A mechanical workshop has two different machines used for forging. Both the machines perform to a similar degree of same accuracy. Machine A costs $10,000 initially, whereas machine B costs $12,000. It has been estimated that the cost of maintenance will be $500 for machine A and $200 for machine B in the first year. The management expects these costs to increase 10% per year. The management uses a six-year study period, and its effective income tax rate is 40%. Both the machines qualify as % year MACRS (GDS) property. Which machine should the management choose if the after-tax market-based is 8% per year?

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