Question 5

"The FIN340 Company is evaluating the purchase of 2 competing machines and wants to choose the machine with the lower equivalent annual cost (EAC); Machine A has an upfront purchase price of $124,800, an annual operating cost of $13,728 and a machine life of 3 years.; Machine B has an upfront purchase price of $221,000, an annual operating cost of $14,365 and a machine life of 6 years; If our company has a WACC of 15.0%, which machine has the lower equivalent annual cost (EAC) and what is its EAC?"

		"$275,364 / Machine A"
		"$72,761 / Machine A"
		"$72,761 / Machine B"
		"$275,364 / Machine B"
		"$68,388 / Machine A"
		"$68,388 / Machine B"
		"$156,144 / Machine A"
		"$275,364 / Machine B"