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Suppose a company is considering the purchase of two different pieces of equipment, A and B, that will perform the same task and generate the

Suppose a company is considering the purchase of two different pieces of equipment, A and B, that will perform the same task and generate the same cash flows. The information is presented in the table below:

Initial and Operating costs ($)

Equipment

Year 1

Year 2

Year 3

Year 4

A (life=1 year)

15,000

6,000

B (life=3years)

20,000

10,000

10,000

10,000

Assume a required rate of return of 10% per annum for both pieces of equipment, which equipment should the company purchased?

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