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You have been asked to evaluate two machines. The benefits from ownership are identical. Machine A costs $300 to buy and install, lasts for 5

You have been asked to evaluate two machines. The benefits from ownership are identical. Machine A costs $300 to buy and install, lasts for 5 years, and costs $160 per year to operate. Machine B costs $500, lasts for 7 years, and costs $120 per year to operate. Both machines have zero salvage value. Assuming that this is a one-time acquisition, which machine do you recommend if the cost of capital is 15%?

A.

Machine A, the PV is $163 more than Machine B.

B.

Machine A, the PV of its costs is $163 less than Machine B.

C.

Machine A, because the project length is two years less than Machine B.

D.

Machine B, the PV is $163 more than Machine A.

E.

Machine B, the PV of its costs is $163 less than Machine A.

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