Question
You are considering the purchase of one of two machines required in your production process. Machine A has a life of two years. Machine
You are considering the purchase of one of two machines required in your production process. Machine A has a life of two years. Machine A costs $70 initially and then generates $50 in revenue per year. Machine B has an initial cost of $85. It generates $40 in revenue for each year of its three-year life. Either machine must be replaced at the end of its life. Which is the better machine for the firm? The discount rate is 15 percent and the tax rate is zero. OA, because of of higher NPV OB, because of higher EAC OA, because of higher EAC OB, because of lower EAC 1
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