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

---

Definitions:

Challenging Goals

Specific, difficult objectives set to motivate and improve performance by pushing boundaries beyond the current capabilities.

Positive Attitude

A mental state which involves looking at the good side of things and expecting positive outcomes.

Hope

An optimistic state of mind based on the expectation of positive outcomes with respect to events and circumstances in one's life or the world at large.

Joining Threshold

The minimum criteria or conditions required for an individual or entity to become part of a group, organization, or system.