Q7: After deciding to have three machines to meet the forecast demand for the coming five years, you are considering the following information to decide on the best machines to buy.

Capacity	Salvage value/machine	Investment/machine	Economic life	Alternative
100 unit/hour	12000	$200000	9	Italian
100 unit/hour	25000	$250000	9	German
100 unit/hour	30000	220000	9	Japanese

You are expecting to sell 2500 units a day 5 days a week at a unit cost of $3 with annual incease of 1%. Labor per hour per machine is $10 and expected to remain the same over the whole period. Annual material cost (including waste) is expected to be $250000 for the German machine, $220000 for the Italian and $200000 for the Japanese. Maintenance and other operating expenses (excluding depreciation) are expected to total $180000 per year with annual increase of 3%. Which machine would you buy if the the cost of capital (discount rate is 12%).