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A company is analyzing two machines to determine which one it should purchase. The company requires a rate of return of 15 percent and uses
A company is analyzing two machines to determine which one it should purchase. The company requires a rate of return of 15 percent and uses straight-line depreciation to a zero book value over the life of its equipment. Ignore bonus depreciation. Machine A has a cost of $462,000, annual after-tax cash outflows of $46,200, and a four-year life. Machine B costs $898,000, has annual after-tax cash outflows of $16,500, and has a seven-year life. Whichever machine is purchased will be replaced at the end of its useful life. The company should purchase because that machine's EAC is less as compared to the other machine's EAC. A company is analyzing two machines to determine which one it should purchase. The company requires a rate of return of 15 percent and uses straight-line depreciation to a zero book value over the life of its equipment. Ignore bonus depreciation. Machine A has a cost of $462,000, annual after-tax cash outflows of $46,200, and a four-year life. Machine B costs $898,000, has annual after-tax cash outflows of $16,500, and has a seven-year life. Whichever machine is purchased will be replaced at the end of its useful life. The company should purchase because that machine's EAC I less as compared to the other machine's EAC
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