You Are Considering the Purchase of One of Two Machines

question 98

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 $20,000 initially, and then $4,000 per year in maintenance costs. Machine B costs $25,000 initially, has a life of three years, and requires $3,500 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 14 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:

Blacklist

A list of people or entities who are denied a particular recognition, service, or commodity due to political reasons, ethical concerns, or industry standards.

Auteur Theory

A film criticism concept that suggests the director's personal vision, style, and creative input predominately shape a film, making them the "author" of the movie.

Paramount Decision

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House Un-American Activities Committee

In 1938, a group within the U.S. House of Representatives was formed to carry out probes into supposed disloyalty and activities undermining the state among private individuals, government workers, and organizations believed to be connected with Communism.