A firm is trying to choose between two machines to manufacture a new line of office furniture. The financial data for each machine have been compiled as follows: Machine A Machine B Initial investment required $20,000 $12,000 Service life б уears 3 years Salvage value $5,000 $3,000 Annual operating expenses $4,000 $2,500 Annual operating revenue $15,000 $12,500 Depreciation method 5-year MACRS 5-year MACRS The firm's marginal tax rate is 40% and uses a 15% discount rate to value the projects. Also, assume that the required service period is indefinite.

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