Question: your company needs a machine for the next seven years...
Your company needs a machine for the next seven years, and you have two choices (assume an annual interest rate of 6%).
Machine A costs $140,000 and has an annual operating cost of $46,000. Machine A has a useful life of seven years and a salvage value of $8,000.
Machine B costs $180,000 and has an annual operating cost of $24,000. Machine B has a useful life of five years and no salvage value. However, the life of Machine B can be extended by two years with a certain amount of investment. If Machine B's life is extended, it will still cost $24,000 annually to operate and still have no salvage value.
What would you pay at the end of year 5 to extend the life of Machine B by two years?
You should pay $________.(Round to the nearest dollar.)