1* Logar plc is considering the purchase of a machine which will increase sales by 110,000 per year for a period of five years. At the end of the five-year period, the machine will be scrapped. Two machines are being considered and relevant financial information on each is as follows: Machine A Machine B Initial cost (2) Labour cost ( per year) Power cost ( per year) Scrap value (8) 200,000 10,000 9,000 nil 250,000 7,000 4,000 25,000 The following average annual rates of inflation are expected: Sales prices 6 per cent per year Labour costs 5 per cent per year Power costs 3 per cent per year Logar pays corporation tax of 30 per cent one year in arrears and has a nominal after-tax cost of capital of 15 per cent. Capital allowances are available on a 25 per cent reducing balance basis. Advise the financial manager of Logar on the choice of machine