Question 8: [10 marks] A corporation is faced with a choice between two machines, Beta...
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Finance
Question 8: [10 marks]
A corporation is faced with a choice between two machines, Beta and Zeta, both of which are designed to improve operations by saving on labour costs. Beta costs $20, 000 and will generate an annual labour savings of $6, 000. Zeta costs $22, 000 and will save $6, 500 annually. Beta has a useful life of 5 years and Zeta has a useful life of 6 years. Assuming that cost of capital is 11% per annum, and zero salvage value for both machines, which machine is preferable, and why?
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