Livelong Ltd has the continuing need for a cutting machine to perform a particular function vital to the business’s activities. There are two machines on the market, the Alpha and the Beta. Investigations show that the data relating to costs and life expectancy of each machine are as follows:

The two machines are identical in terms of capacity and quality of work.
The relevant cost of finance is 10 per cent p.a. Ignore taxation and inflation.
Produce workings that show which machine is the most economical.
By how much, and in which direction, would the acquisition cost of an Alpha need to alter in order for the two machines to be equally economical?

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Alpha Beta Acquisition cost 50 000 90 000 Residual value at the end of the machine's useful life 5 000 7 000 Annual running cost 10 000 8.000 Useful life 4 years 7 years