One of two machines, alpha and beta, is to be purchased to provide for a new production operation in a factory. Machine alpha costs $10 000 and machine beta, $15 000. However, machine beta will result in an annual savings in operating costs of $800 over machine alpha. Which machine would you recommend purchasing and why, if each has a useful life of 10 years and money is worth 6 percent? Assume that both machines will be worthless at the end of 10 years. What value of annual savings of machine beta over machine alpha would result in each being equally desirable?
What will be an ideal response?
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