accounting for decision making

Make or Buy Decision for Company ABC You are the new financial analyst for Company ABC. ABC is considering 2 alternatives to replace an old machine: Option 1 Option 2 Build the required machine. Buy the required machine Use the information below to determine which option is best for Company ABC using Net Present Value. In less than 20 words, state the reason of your recommendation. Ignore taxes, CCA tax shields Round all dollars value to the nearest dollar. Assume - the time taken to build the machine is the same as installing a purchased machine. - Cost of Capital is - Annual revenue for the 5 years starting from using the build/buy - Annual expenses for the 5 years starting from using the build/buy 8% $500,000 $300,000 Option 1 - machine's estimated useful life is there is no salvage value at the end of the five years - estimated cost to build the machine is 5 $0 $450,000 Option 2 - machine's estimated useful life is the salvage value at the end of the five years the purchase price of the machine 5 $15,000 $650.000