Question: You can continue to use your less efficient machine at the cost of $7,000 annually. Alternatively, you can purchase a more efficient machine for $12,000

You can continue to use your less efficient machine at the cost of $7,000 annually. Alternatively, you can purchase a more efficient machine for $12,000 plus $5,000 annual maintenance. If the new machine lasts 4 years and the cost of capital is 9%, should you purchase the new machine? How much would you save in equivalent annual costs?

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