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4. Your company needs a machine for the next seven years, and you have two choices. Machine A: costs $113000 and has an annual operating
4. Your company needs a machine for the next seven years, and you have two choices. Machine A: costs $113000 and has an annual operating cost of $31000. Machine A has a useful life of seven years and a salvage value of $15600 at the end of 7 years, Machine B: costs $233000 and has an annual operating cost of $5000. Machine B has a useful life of five years and no salvage value. However, the life of machine B can be extended by two years with a major overhaul. If machine B's life is extended, it will still cost S5000 annually to operate and still have no salvage value. What is the maximum amount that you would pay at the end of year 5 to extend the life of machine B by two years? Use AEC method. Assume an annual interest rate of 8.3%
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