4. A company is considering to purchase a piece of equipment for a specific task. Two alternative machines are available on the market – one a standard machine (A) and the other a semi-automatic one (B). The comparative data of the two machines is given below:

Labour and maintenance costs incurred during a year can be assumed to occur at the end of the year. The prevailing interest rate for money is 5% per annum.

a) For each machine, calculate the total cost (excluding salvage value), in present terms, associated with a single estimated lifetime cycle.

b) Based on capitalised costs, which machine should the company choose? You must show all your working in arriving at your answer.