As a result of improvements in product engineering, United Automation is able to sell one of its

Activity 3.8
As a result of improvements in product engineering, United Automation is able to sell one of its two milling machines Both machines perform the same function but differ in age
Alternative 1) The newer machine could be sold today for $50,000 its operating costs are $20,000 a year, but at the end of five years, the machine will require a $20,000 overhaul (which is tax deduct ore) Thereafter operating costs will be $30.000 unit the machine is finally sold in year 10 for $5,000
Alternative 2: The older machine could be sold today for $25,000. If it is kept, it will need an immediate $20,000 (tax-deductible) overhaul. Thereafter, operating costs will be $30,000 year until the machine is finaly sold in year 5 for 11,000 Soth machines are fully depreciated for tax purposes. The company pays tax at 35% Cash flows have been forecasted in real terms The real cost of capitals 1214
Which machine shoud United Automation set Explain the assumptions underying your answer
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