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Long Memorial Hospital is deciding between purchasing one of two ventilator machines for its ICU. Machine A costs $65,000. Its annual maintenance and repairs will
Long Memorial Hospital is deciding between purchasing one of two ventilator machines for its ICU. Machine A costs $65,000. Its annual maintenance and repairs will amount to $5,000 for each of the first five years and $7,000 for each of the next ten years. After 15 years, the machine will be scrapped. Machine B costs $45,000, has the life expectancy of 10 years and will cost $5000 per year to maintain and repair. Using 8% discount rate on its investments, which machine should Long Memorial Hospital choose?
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