● 21. Company X is forced to choose between machines A and B. The two machines are designed differently but have identical capacity and do exactly similar job. Machine A costs `1,50,000 and will last for 3 years. It costs `40,000 per year to run. Machine B costs `1,00,000 and will last for 2 years. It costs `60,000 per year to run. These are real cash flows. The costs are forecasted in rupees of constant purchasing power. Ignore tax.

Opportunity cost of capital is 10%. Which machine X should buy? [C.A Final May 2000]