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Your company is analyzing two machines to determine which one it should purchase. Whichever machine is purchased will be replaced at the end of its

Your company is analyzing two machines to determine which one it should purchase. Whichever machine is purchased will be replaced at the end of its useful life. The company requires a 10 percent rate of return and uses straight-line depreciation to a zero book value over the life of the machine. Machine A has a cost of $300,000, annual operating costs of $42,000, and a 5-year life. Machine B costs $265,000, has annual operating costs of $50,000, and a 4-year life. The company currently pays no taxes. Which machine should be purchased and why? (Hint: consider the equivalent annual cost-EAC of the two machines)
A. Machine A; because it will save the company about $8,783 a year
B. Machine A; because it will save the company about $14,670 a year
C. Machine B; because it will save the company about $11,482 a year
D. Machine B; because it will save the company about $9,916 a year
E. Machine A; because it will save the company about $12,461 a year

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