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You are considering the purchase of one of two machines used in your manufacturing plant. Machine A has a life of two years, costs SBO
You are considering the purchase of one of two machines used in your manufacturing plant. Machine A has a life of two years, costs SBO initially, and then $125 per year in maintenance costs. Machine B costs $150 initially, a life of three years, and requires $100 in annual maintenance costs. Either machine must be replaced at the end of its life. Which is the better machine for the firm? The discount rate is 12% and the tax rate is zero. A) Machine A is better because its NPV is higher (less negative than the NPV of machine B. B) Machine A is better because its EAC is -$49. which is less than the EAC of -$59 for B. C) Machine B is better because its EAC is -$127, which is less than the EAC of $147 for A. D) Machine B is better because its EAC is -$162, which is less than the EAC of -$172 for A. E) Neither machine should be chosen since both have a negative NPV
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