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.

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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