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PROBLEM TWO (10 POINTS) Viable Corp. purchases machines for use in its plant. Machine Type A is typical of these ma-chines. Currently, Viable is considering
PROBLEM TWO (10 POINTS) Viable Corp. purchases machines for use in its plant. Machine Type A is typical of these ma-chines. Currently, Viable is considering the purchase of a new Type A machine. Two different brand names are being considered. Viable expects a 12% retum on its plant investments Cost (cash basis)....... Operating expense to operate the machine (per year). Estimated useful life (years)... Estimated residual value (% of cost) Brand A $100,000 $7,000 8 20% Brand B $90,000 $8,000 8 10% Required a) Compute the present value of the costs of the two alternative brands of machines (Assume that all variables, other than the four listed above, are identical for both brands). b) Which machine should Viable purchase? Are any other factors besides our computations relevant? Prepare the response in memo form to senior management
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