6) You can choose between two purchases: Machine A or Machine B. Machine A costs $22,000 and has a salvage value of $9,000 after 3 years. Machine B costs $30,000 and has a salvage value of $16,000 after 4 years. You can lease a Machine B equivalent for $6,000 per year, if you initially purchased Machine B. You need a machine for a total of 6 years, and can purchase a new machine in the future at the same price with the same salvage value. If i is 9% annual rate compounded annually, which machine should be purchased? Show work and justify answer.
6) You can choose between two purchases: Machine A or Machine B. Machine A costs $22,000 and has a salvage value of $9,000 after 3 years. Machine B costs $30,000 and has a salvage value of $16,000 after 4 years. You can lease a Machine B equivalent for $6,000 per year, if you initially purchased Machine B. You need a machine for a total of 6 years, and can purchase a new machine in the future at the same price with the same salvage value. If i is 9% annual rate compounded annually, which machine should be purchased? Show work and justify answer.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:6) You can choose between two purchases: Machine A or Machine B. Machine A costs $22,000
and has a salvage value of $9,000 after 3 years. Machine B costs $30,000 and has a salvage value
of $16,000 after 4 years. You can lease a Machine B equivalent for $6,000 per year, if you
initially purchased Machine B. You need a machine for a total of 6 years, and can purchase a
new machine in the future at the same price with the same salvage value. If i is 9% annual rate
compounded annually, which machine should be purchased? Show work and justify answer.
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