where D8 is equal to 4

Question 5 A 3-year-old machine purchased by HKCC Company for $200,000 is getting old and unable to meet today's market demands. The machine can be upgraded now for $(80,000 + D8 x 1,000) or sold for $(40,000 + D8 x 1,000). The current machine will have an annual operating and maintenance (O&M) cost of $100,000 and a $(30,000 + D8 x 1,000) salvage value in 3 years. If upgraded, the old machine will be retained for only 3 more years, then replaced with a new machine. The replacement machine, which can serve the company now and for at least 8 years, costs $(200,000 + D8 x 1,000). In addition, there are shipping and handling charges of $20,000. Its salvage value will be $(40,000 + D8 x 1,000) for years 1 through 4; $(20,000 + D8 x 1,000) after 5 years; and $(10,000 + D8 x 1,000) thereafter. It will have an annual operating and maintenance cost of $65,000 per year. HKCC Company wants to perform an economic analysis at 15% per year using a 3-year planning horizon. (c) Assume a public project by HKSAR Government also requires purchasing the same new machine as mentioned above. This new machine is very environmental friendly. But it costs 50% more than a less environmental friendly machine. Suppose the useful life, salvage value, shipping and handling charges, and annual operating cost of both machines are the same. The only difference is that the environment benefit it brings to the public is quantified as $13,000 per year over the new machine' useful life of 8 years. Based on economic analysis only, should the HKSAR Government buy this more expensive machine? Explain your answer based on economic analysis using B/C ratio. The discount rate used by the HKSAR Government is (1 + D8)% per year. Use 4 decimal places of the compound interest factors to do your calculation. (4 marks)