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Precision Tool is analyzing two machines to determine which one it should purchase. The company requires a 15 percent rate of return and uses straight-line
Precision Tool is analyzing two machines to determine which one it should purchase. The company requires a 15 percent rate of return and uses straight-line depreciation to a zero book value over the life of its equipment. Machine A has a cost $892,000, annual operating costs of $26,300, and a 4 year life. Machine B costs $1,127,000, has annual operating costs of $19,500, and has a 5 year life. Whichever machine is purchased will be replaced at the end of its useful life. Precision Tool should purchase Machine ___ because it lowers the firm's annual cost by approximately ___ as compared to the other machine A. A: $16,965 B. A: $17,404 C. B: $16,965 D. B: $17,404 E. B: $17,521 If you could give an abbreviated explanation as to how you achieved the answer that would be greatly appreciated. Thanks
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