Question

Please, I need it with 40 minutes if you can post it. thanks

Machine A costs $37,000 to purchase and is worth $8,000 in 5 years at the end of its service life. Machine B costs $20,000 to purchase and is worth $1,000 in 4 years at the end of its service life. Assume that these machines are needed for 20 years (required service period). Each machine can be repurchased at the same price in the future, and assume the annual maintenance cost of each machine is negligible. Use 8% annual interest rate. What is the Present Total Cost of the machine that should be purchased? Enter your answer as a positive number."

Answer 1

Present Total Cost of Machine A: $77,595.15. [This is the closest value, when we take absolute figures using Excel for discount rates. If we round up discount factors to 4 decimal places, the value willl be $77,622.10, but you get the idea.] [See Note 1 for calculations.]

Present Total Cost of Machine B: $57,107.21. [This is the closest value, when we take absolute figures using Excel for discount rates. If we round up discount factors to 4 decimal places, the value willl be $57,133.20.] [See Note 2 for calculations.]

The calculations are based on absolute values from Excel. If you are taught to take 4 or 5 or 6 or such other decimal places, then values will definitely change. If appropriate information regarding that is provided, I can rework it again in no time.

Note 1: Machine A-

Years	Cash flows	Discount Factor at 8%	Present Value
0	-37,000.00	1.000000	-37,000.00
1	-	0.925926	-
2	-	0.857339	-
3	-	0.793832	-
4	-	0.735030	-
5	-29,000.00	0.680583	-19,736.91
6	-	0.630170	-
7	-	0.583490	-
8	-	0.540269	-
9	-	0.500249	-
10	-29,000.00	0.463193	-13,432.61
11	-	0.428883	-
12	-	0.397114	-
13	-	0.367698	-
14	-	0.340461	-
15	-29,000.00	0.315242	-9,142.01
16	-	0.291890	-
17	-	0.270269	-
18	-	0.250249	-
19	-	0.231712	-
20	8,000.00	0.214548	1,716.39
Total			-77,595.15

Hint: $29,000 = $8000 (salvage value) - $37000 (price of new machine A)

Note 2: Machine B-

Years	Cash flows	Discount Factor at 8%	Present Value
0	-20,000.00	1.000000	-20,000.00
1	-	0.925926	-
2	-	0.857339	-
3	-	0.793832	-
4	-19,000.00	0.735030	-13,965.57
5	-	0.680583	-
6	-	0.630170	-
7	-	0.583490	-
8	-19,000.00	0.540269	-10,265.11
9	-	0.500249	-
10	-	0.463193	-
11	-	0.428883	-
12	-19,000.00	0.397114	-7,545.16
13	-	0.367698	-
14	-	0.340461	-
15	-	0.315242	-
16	-19,000.00	0.291890	-5,545.92
17	-	0.270269	-
18	-	0.250249	-
19	-	0.231712	-
20	1,000.00	0.214548	214.55
Total			-57,107.21

Hint: $19,000 = $1000 (salvage value) - $20000 (price of new machine B)

Hope this helps.
Feel free to ask for clarifications in the comment section below.
Kindly consider leaving a thumbs up - that enables us to keep solving.
Good luck!