A company'll purchase 1 of 2 machines listed below. Based on a life of 10 yrs, which machine should be selecte?

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Machine 1:

Additional Investment Required: $8000

Increased in Income: $910

Machine 2:

Additional Investment Required: $15500

Increased in Income: $1400

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  • You haven’t given any discounting, scrap value etc so I will assume this is NOT looking a net present value, just absolute figures. The variables involved are just time, investment and income change.

    In that case, machine one, will generate $910×10 = $9100 in additional income, at a cost of ($8000), leaving a net increase of $1100. Machine two, will generate $1400×10 = $14000 in additional income, at a cost of ($15500), leaving a net loss of $1500 over the ten years.

    So, machine one is the better option.

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