Question
Bruno's is analyzing two machines to determine which one it should purchase. The company requires a rate of return of 14.6 percent and uses straight-line
Bruno's is analyzing two machines to determine which one it should purchase. The company requires a rate of return of 14.6 percent and uses straight-line depreciation to a zero book value over a machine's life. Ignore bonus depreciation and taxes. Machine A has a cost of $318,000, annual operating costs of $8,700, and a life of 3 years. Machine B costs $247,000, has annual operating costs of $9,300, and a life of 2 years. Whichever machine is purchased will be replaced at the end of its useful life. Which machine should Bruno's purchase and why? Select one: a. Machine B; because it will save the company about $16,510 a year b. Machine B; because it will save the company about $11,609 a year c. Machine A; because it will save the company about $18,100 a year d. $154,224.08 e. Machine A; because it will save the company about $13,406 a year
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