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:

Insider Information

Privileged, non-public information held by company insiders or others that could provide an unfair advantage in securities trading.

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.