Look again at your calculations for Problem 28 above. Suppose that technological change is expected to reduce
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Look again at your calculations for Problem 28 above. Suppose that technological change is expected to reduce costs by 10% per year. There will be new machines in year 1 that cost 10% less to buy and operate than A and B. In year 2 there will be a second crop of new machines incorporating a further 10% reduction, and so on. How does this change the equivalent annual costs of machines A and B?
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Related Book For 
Principles of Corporate Finance
ISBN: 978-0077404895
10th Edition
Authors: Richard A. Brealey, Stewart C. Myers, Franklin Allen
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