ABC Company needs to acquire a machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently on the market. The company has determined the following:

Machine A could be purchased for $46,000. It will last 10 years with annual maintenance costs of $1,800 per year. After 10 years the machine can be sold for $5,000.

Machine B could be purchased for $41,000. It also will last 10 years and will require maintenance costs of $9,000 in year three and $9,000 in year six. After 10 years, the machine will have no salvage value.

Required:

Assume an interest rate of 5% properly reflects the time value of money in this situation and that maintenance costs are paid at the end of each year. Ignore income tax considerations.

Calculate the present value of Machine A & Machine B. Which machine should ABC Company purchase?

present value of Machine A & Machine B. Which machine should ABC purchase properly reflects the time value of money in this situation and Instructions: Copy the table below and enter the present value of each machine in the appropriate Future Present value of an value of an Future Present ordinary ordinary Value of 1 value of 1 annuity 0.86384 n 3 Present value of 6 1.15763 134010 an 10 1.62889 0.74622 annuity 3.15250 6.80191 12.57789 0.61391 annuity due 2.85941 5.32948 5% 8.10782 5% 2.72325 5.07569 7.72173 1 B Best Option