You Are Evaluating Two Different Cookie-Baking Ovens

question 33

Multiple Choice

You are evaluating two different cookie-baking ovens. The Pillsbury 707 costs $25,000, has a six-year life, and has an annual OCF (after-tax) of −$5,000 per year. The Keebler Cookie Munster costs $40,000, has a seven-year life, and has an annual OCF (after-tax) of −$500 per year. If your discount rate is 10 percent, what is each machine's EAC?

• A) Pillsbury: −$11,594.9, Keebler: $8,716.22
• B) Pillsbury: −$11,594.94, Keebler: −$9,145.62
• C) Pillsbury: −$10,740.18, Keebler: −$9,145.62
• D) Pillsbury: −$10,740.18, Keebler: −$8,716.22

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Definitions:

Securities Commission

A regulatory body or agency responsible for overseeing the securities industry, including the enforcement of laws and regulations regarding trading and investments.

Online Bankers

Professionals who facilitate banking services and transactions through digital platforms without the necessity for a physical bank branch.

Binomial Distribution

A statistical distribution representing the number of successes in a fixed number of independent trials, with each trial having the same probability of success.

P(X > 1)

The probability that a random variable X takes on a value greater than 1.