You Can Continue to Use Your Less Efficient Machine at a Cost

Multiple Choice

You can continue to use your less efficient machine at a cost of $8,000 annually for the next five years.Alternatively, you can purchase a more efficient machine for $12,000 plus $5,000 annual maintenance.At a cost of capital of 15 percent, you should:

A) Buy the new machine and save $600 in equivalent annual costs
B) Buy the new machine and save $388 in equivalent annual costs
C) Keep the old machine and save $388 in equivalent annual costs
D) Keep the old machine and save $580 in equivalent annual costs $12,000 + $5,000