You can continue to use your less efficient old machine with a maintenance cost of $8,000 annually for the next five years (no initial cost) Alternatively, you can purchase a more efficient new machine for $12,000 initial cost today, plus $5,000 annual maintenance cost with the same 5 years life At a cost of capital of 15 , you should A Buy the new machine and save $388 in equivalent annual annuity B Keep the old machine and save $480 in equivalent annual annuity C Buy the new machine and save $580 in equivalent annual annuity D Keep the old machine and save $388 in equivalent annual annuity E Keep the old machine and save $580 in equivalent annual annuity

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Question: You can continue to use your less efficient old machine with a maintenance cost of $8,000 annually for the next five years (no initial cost).

You can continue to use your less efficient old machine with a maintenance cost of $8,000 annually for the next five years (no initial cost). Alternatively, you can purchase a more efficient new machine for $12,000 initial cost today, plus $5,000 annual maintenance cost with the same 5 years life. At a cost of capital of 15%, you should:

A. Buy the new machine and save $388 in equivalent annual annuity.
B. Keep the old machine and save $480 in equivalent annual annuity.
C. Buy the new machine and save $580 in equivalent annual annuity.
D. Keep the old machine and save $388 in equivalent annual annuity.
E. Keep the old machine and save $580 in equivalent annual annuity

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