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A firm is analyzing two machines to determine which one it should purchase. Whichever machine is purchased will be replaced at the end of its
A firm is analyzing two machines to determine which one it should purchase. Whichever machine is purchased will be replaced at the end of its useful life. The company requires a 12 percent rate of return and uses straight-line depreciation to a zero book value over the life of the machine. Machine A has a cost of $600,000, annual operating costs of $52,000, and a 8-year life. Machine B costs $350,000, has annual operating costs of $87,000, and a 5 -year life. The firm currently pays no taxes. Which machine should be purchased and why (Hint: calculate and compare the EAC of the two machines)? You need to show your work in order to earn full credit for this question. For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). A firm is analyzing two machines to determine which one it should purchase. Whichever machine is purchased will be replaced at the end of its useful life. The company requires a 12 percent rate of return and uses straight-line depreciation to a zero book value over the life of the machine. Machine A has a cost of $600,000, annual operating costs of $52,000, and a 8-year life. Machine B costs $350,000, has annual operating costs of $87,000, and a 5 -year life. The firm currently pays no taxes. Which machine should be purchased and why (Hint: calculate and compare the EAC of the two machines)? You need to show your work in order to earn full credit for this question. For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac)
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