Question
Brand Wrapper Pty Ltd is considering the purchase of a new machine. Machine A costs $250,000, has an annual cash operating cost of $150,000 and
Brand Wrapper Pty Ltd is considering the purchase of a new machine. Machine A costs $250,000, has an annual cash operating cost of $150,000 and will last for 6 years. Machine B has a cost of $500,000, annual cash operating cost of $180,000 and a 9-year life. The sales for each machine will be $500,000 per year. The required return is 10 percent and the tax rate is 30 percent. Both machines will be depreciated to zero on a straight-line basis over their lives.
If the company plans to replace the machine when it wears out on a perpetual basis, which machine should be chosen? Please round up your answer to zero decimal places and fill you answers in the blank cell for each part.
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