p$1 SwitchOver Inc. is considering the purchase of a new electronic machine for its production facilities. The production manager considers the new machine to be necessary because the current electronic machine is at the end of its useful life and maintenance costs for the machine have significantly increased during the past year. The company has received bids from two different suppliers: Santoni and Flainox. The electronic machines from Santoni and Flainox are similar but there are differences in the cost of the machines and their estimated cost savings. Management needs to decide which electronic machine to purchase. The following information is given on the two machines.

If SwitchOvers required rate of return is greater than the crossover rate for the two machines, what would SwitchOver do? a) b) c) d) a.Reject the Santoni bid and purchase the

b.Flainox machine.

c.Reject the Flainox bid and purchase the Santonimachine.

d.Reject both machines. Not determinabl

Santoni Flainox Cost of electronic machines $350,300 50,000 $607,100 90,000 Estimated annual cash cost savings (after tax)