You Are Evaluating Two Different Machines

question 12

Multiple Choice

You are evaluating two different machines. Machine A costs $10,000, has a five-year life, and has an annual OCF (after-tax) of −$2,500 per year. Machine B costs $15,000, has a seven-year life, and has an annual OCF (after-tax) of −$2,000 per year. If your discount rate is 14 percent, using EAC which machine would 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:

Liability of Foreignness

The challenges and costs associated with operating in a market outside of a company's home country, including cultural differences and unfamiliar regulatory environments.

Import Tariffs

Taxes imposed by a government on goods and services imported into a country, used to control trade and protect domestic industries.

Global Demand

The total demand for a product or service across all countries and regions around the world.

Liability of Foreignness

This concept describes the challenges and additional costs that companies face when entering and operating in foreign markets, as opposed to their home countries.