Question: Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they have the costs shown in the following table. He

Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they have the costs shown in the following table. He is told to assume that:
(a) The life of each machine is 3 years,
(b) The company thinks it knows how to make 12% on investments no more risky than this one.

Determine via the present value method, which machine Tim shouldrecommend.

Machine A Machine B Original cost Labor per year Maintenance per year Salvage value $10,000 2,000 4,000 2,000 $20,000 4,000 1,000 7,000

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