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Lindner Corp. is comparing two machines to determine which one it should purchase. The company requires a rate of return of 16 percent and uses
Lindner Corp. is comparing two machines to determine which one it should purchase. The company requires a rate of return of 16 percent and uses straight-line depreciation to a zero book value over the life of its equipment. Machine X has a cost of $7,000, annual cash outflows of $2,800, and a three- year life. Machine Y costs $8,000, has annual cash outflows of $1100, and has a two-year life. Whichever machine is purchased will be replaced at the end of its useful life. What is the the EAC for X and Y and which should Lindner Corp. choose (EACx; EACy; decision)? (-$13,290; -$9,770; choose Y) O (-$5,917; -$6,084; choose X) O (-$13,290; -$9,770; choose X) (-$5,133; -$5,100; choose X) O (-$5,917; -$6,084; choose Y)
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