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Your company needs a machine for the next seven years, and you have two choices (assume an annual interest rate of 8%). Machine A costs
Your company needs a machine for the next seven years, and you have two choices (assume an annual interest rate of 8%). Machine A costs $110,000 and has an annual operating cost of $36,000. Machine A has a useful life of seven years and a salvage value of $18,000. Machine B costs $170,000 and has an annual operating cost of $20,000. Machine B has a useful life of five years and no salvage value. However, the life of Machine B can be extended by two years with a certain amount of investment. If Machine B's life is extended, it will still cost $20,000 annually to operate and still have no salvage value. What would you pay at the end of year 5 to extend the life of Machine B by two years
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