Question: consider two mutually exclusive machines: A and B . Acquisition cost of A is $1,000 and that of B is $1,800 assume that both machines

consider two mutually exclusive machines: A and B . Acquisition cost of A is $1,000 and that of B is $1,800 assume that both machines produce identical revenue and incur identical other costs over their lives. Both machines can be acquired repeatedly over time but the cost of capital of A is 6% and the cost of capital of B is 8%. Additionally. their maintenance costs over their lives (A has economic life of 3 years and B has economic life of 6 years) are as follows:

Year Maintenance Cost

A B

1 160 132

2 160 132

3 160 132

4 132

5 132

6 130

Which of the two machines is economically more desirable?

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