Question
You are trying to choose between purchasing one of two machines for a factory. Machine A costs $15,900 to purchase and has a three-year life.
You are trying to choose between purchasing one of two machines for a factory. Machine A costs $15,900 to purchase and has a three-year life. Machine B costs $17,100 to purchase but has a four year life. Regardless of which machine you purchase, it will have to be replaced at the end of its operating life. Assume a marginal tax rate of 35 percent and a discount rate of 14 percent. Calculate the equivalent annual costs (EAC) of each machines. (Do not round intermediate calculations. Round answers to 2 decimal places, e.g. 15.27.)
| Equivalent Annual Cost (EAC) of machine A | $ | ||
| Equivalent Annual Cost (EAC) of machine B | $ |
Which machine should you choose? You should choose
Machine A Machine B
.
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Audit And Accounting Guide State And Local Governments
Authors: AICPA
1st Edition
1945498587, 978-1945498589
