Reviewing your company’s new manufacturing process you decided to improve safety of equipment. You consider 3 choices of purchasing a new machine:
Machine A at cost of $94,000
Machine B at cost of $70,000 plus 1,200 more per year in maintenance
Machine C at cost of $64,000 plus 1,500 more per year in maintenance
If machine A, B, and C are expected to last 20 years and have the same productivity, how much should you add to the purchasing cost of machine B and C to make fair price comparison and what would your choice be? Assume an interest rate of 6.08%.
What is the present value you supposed to put into your bank account to receive of $38,000 in five years from now if the interest rate is expected to be 4.67 %?