Question
Machine X has an initial cost of $10,000, annual maintenance of $1000 per year, and no salvage value at the end of its 12-year useful
Machine X has an initial cost of $10,000, annual maintenance of $1000 per year, and no salvage value at the end of its 12-year useful life. Machine Y costs $15,000. The first year there is no maintenance cost. The second year, maintenance is $100, and increases $100 per year in subsequent years. The machine has an anticipated $2000 salvage value at the end of its 12-year useful life. If interest is 8%, determine the Net Present Cost of each alternative for the 12 year horizon and identify which machine should be selected for the 12 year horizon?
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