Question
Alan Moore runs an AI company that involves 10 giant Behemoth artificial neural network computers. These computers have gotten old and need to be replaced.
Alan Moore runs an AI company that involves 10 giant Behemoth artificial neural network computers. These computers have gotten old and need to be replaced. Mr. Moore is considering two options: 1) replace the existing machines with 10 new and updated Behemoth units (each will cost $800,000 and will not involve any additional operating costs), and 2) purchase 10 new Shikari machines that will cost $1.25 million each and will save $500,000 per year in operator costs. Note that Shikari units will last for 10 years, while Behemoth units are becoming obsolete and will last for 7 years. Financial analysts have produced a summary table (below).
Based on the internal rate of return (IRR) figures from the table, which machines should Mr. Moore buy, Behemoth or Shikari? Is this decision reliable? If not, why?
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