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Mazies Clothing Inc. is analyzing two machines to determine which one they should purchase. The company requires a 14% rate of return, each machine belongs
Mazies Clothing Inc. is analyzing two machines to determine which one they should purchase. The company requires a 14% rate of return, each machine belongs in a 30% CCA class, and the firms tax rate is 35%. Machine A has a cost of $290,000, annual operating costs of $8,000, and a 3year life. Machine B costs $180,000, has annual operating costs of $12,000, and has a 3year life. Both machines have zero salvage value at the end of their useful lives. The company will use the accelerated CCA deduction of 1.5 times the rate in Year 1. Ignore the tax effect of the machines after Year 3. Which machine should Mazies Clothing Inc. purchase? Why? Show your calculations
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