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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?

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Definitions:

Claim Messages

Communications used to assert a belief or demand the recognition of a right, often in the context of business or consumer affairs.

Positive Manner

An approach or attitude that focuses on positive aspects or outcomes, often used to encourage constructive feedback or foster a supportive environment.

Order Acknowledgement

A formal document or message confirming the receipt and processing of an order.

Promotional Material

Items or media used to advertise or market a product, service, or event, such as flyers, posters, or online ads.