You Are Trying to Pick the Least-Expensive Machine for Your

question 67

Multiple Choice

You are trying to pick the least-expensive machine for your company. You have two choices: machine A, which will cost $50,000 to purchase and which will have OCF of −$3,500 annually throughout the machine's expected life of three years; and machine B, which will cost $75,000 to purchase and which will have OCF of −$4,900 annually throughout that machine's four-year life. Both machines will be worthless at the end of their life. If you intend to replace whichever type of machine you choose with the same thing when its life runs out, again and again out into the foreseeable future, and if your business has a cost of capital of 14 percent, using EAC which one should you choose?

• A) Machine A
• B) Machine B
• C) All of these choices are correct.
• D) Neither machine A nor B

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Definitions:

Positive Claim

An assertion that something exists or is true, especially one without proof.

Equivocation

The misleading use of a word with more than one meaning or sense, causing an argument to appear logical when it is not.

Shifting Meaning

A logical fallacy that occurs when the meaning of a term or phrase changes in the course of an argument.

Straw Man

A fallacy where an opponent's argument is misrepresented to be easily attacked or refuted.