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Starboard is analyzing two machines to determine which one it should purchase. The company requires a rate of return of 1 4 . 6 percent

Starboard is analyzing two machines to determine which one it should purchase. The company requires a rate of return of 14.6 percent and uses straight-line depreciation to a zero book value over a machine's life. Ignore bonus depreciation and taxes. Machine A has a cost of $318,000, annual operating costs of $10,000, and a life of 4 years. Machine B costs $247,000, has annual operating costs of $9,300, and a life of 2 years. Whichever machine is purchased will be replaced at the end of its useful life. Which machine should Starboard purchase, and why?

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