Question: You are considering buying a 10-year-old machine for $280, or a new fuel-efficient machine for $600. The new machine will save you $5 per month

You are considering buying a 10-year-old machine for $280, or a new fuel-efficient machine for $600. The new machine will save you $5 per month on your fuel bill, and you will be able to sell it for $300 in 10 years. The used machine will have no resale value at that time. Assume the interest rate is 3% per year. a) Which machine will you buy? (6 marks) b) Explain the decision criteria for an investment project using internal rate of return.

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