**Transcription for Educational Website****b. Which machine should Borstal buy?**- ○ Machine A- ● Machine B**c. If there is steady 8% per year inflation, what will be the annual rental payment for machine B for the second year?** *(Enter your answer as a positive value rounded to 2 decimal places.)*Year 2 rental payment: [__________] This section includes a multiple-choice question where Machine B is selected. Following is a calculation question related to inflation and rental payment, where you are asked to determine the adjusted payment for the second year given an 8% annual inflation rate. An input box is provided for the answer. The Borstal Company is considering two machines that perform the same function but have different lifespans. Their costs are outlined below:| Year | Machine A | Machine B ||------|-----------|-----------|| 0 | $48,000 | $58,000 || 1 | 11,600 | 11,200 || 2 | 11,600 | 11,200 || 3 | 11,600 + replace | 11,200 || 4 | | 11,200 + replace |These costs are expressed in real terms.### ProblemSuppose you are Borstal's financial manager. If you had to buy one of these machines and rent it to a production manager for the machine’s economic life, what annual rental payment would you need to charge? Assume a 12% real discount rate and ignore taxes. **(Do not round intermediate calculations. Enter your answers as a positive value rounded to 2 decimal places.)**### Table for Annual Rental Payment Calculation| Annual Rental Payment | ||-----------------------|----------|| Machine A | [Input] || Machine B | [Input] |This scenario involves calculating the equivalent annual cost for each machine and determining the rental payments required to cover these costs over the machines' respective lifespans.

Answered: The Borstal Company has to choose…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The Borstal Company has to choose between two machines that do the same job but have different lives. The two machines have the following costs: Year Machine A 0 OLN3+ 1 2 4 $48,000 11,600 11,600 11,600 + replace Machine A Machine B These costs are expressed in real terms. a. Suppose you are Borstal's financial manager. If you had to buy one or the other machine and rent it to the production manager for that machine's economic life, what annual rental payment would you have to charge? Assume a 12% real discount rate and ignore taxes. (Do not round intermediate calculations. Enter your answers as a positive value rounded to 2 decimal places.) Machine B $58,000 11,200 11, 200 11,200 11,200 + replace Annual Rental Payment
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