A firm is considering an investment in a machine that will enable the firm to earn $500 in after-tax revenue next year. The firm's next best alternative is to save the money at a 10% annual interest rate [assume that there are no taxes on the interest from savings].

a) If the machine costs $450 today, should the firm make the investment in the machine or not? Briefly explain why or why not. [KEY: Assume that the purchase and borrowing costs ALL must be incurred in this one upcoming year]

b) Now suppose that before the firm makes the decision, the prevailing interest rate on savings accounts increases to 12%, but there is no change in the expected revenue from the investment. Does the machine remain a worthwhile investment? [Again, assume that all relevant costs must be incurred in this one year

PLEASE EXPLAIN ANSWER IN DETAIL