What option would be best?

Both at 5% Interest

Option 1

Company is considering an $80,000 investment in new machinery, it will trade in the old machine for $5,000, and will immediately pay $3000 for training costs.

Useful life of 5 years with a salvage value of $4,000

Expectation is that the new machine will result in a one time savings of $12,000 at the end of year one due to improved parts management. Second they will have an annual savings of $21,500

Option 2

• Purchase another Delivery Truck
• Will allow it to expand marketing area & increase revenue by $69,000 per year
• $115,000 truck, 5 year life, $30,000 salvage
• Immediate increase of $5000 of working capital needed
• $32,000 a year increase in salary, taxes,. (every year)
• $20,000 maintenance on the truck at end of 3^rd year