You Are Considering the Purchase of One of Two Machines

question 116

Multiple Choice

You are considering the purchase of one of two machines used in your manufacturing plant. Machine A has a life of two years, costs $100 initially, and then $150 per year in maintenance costs. Machine B costs $200 initially, has a life of three years, and requires $120 in annual maintenance costs. Either machine must be replaced at the end of its life with an equivalent machine. Using EAC which is the better machine for the firm? The discount rate is 12 percent and tax can be ignored.

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

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Definitions:

Syllogism

A form of deductive reasoning that consists of a major premise, a minor premise, and a conclusion, used to infer a relationship between two statements.

Hallucinogenic Drug

A substance that causes hallucinations, or perceptions and sensations that appear real but are not.

Major Term

In a syllogism, the predicate of the conclusion, which also appears in one of the premises.

Syllogism

A syllogism is a form of logical argument that applies deductive reasoning to arrive at a conclusion based on two propositions that are asserted or assumed to be true.