J&J Automotive Is Analyzing Two Machines to Determine Which One

question 114

Multiple Choice

J&J Automotive is analyzing two machines to determine which one they should purchase. The company requires a 16% rate of return and the machinery belongs in a 30% CCA class. Machine A has a cost of $427,000, annual operating costs of $13,000, and a 4-year life. Machine B costs $390,000, has annual operating costs of $6,500, and has a 3-year life. Whichever machine is purchased will be replaced at the end of its useful life. Which machine should J&J purchase and why? Ignore taxes.

• A) A; because its EAC is $162,408.19
• B) A; because its EAC is $14,551.41 less than that of Machine B
• C) B; because its EAC is $181,602.43
• D) B; because its EAC is $11,209.18 less than that of Machine A
• E) B; because its EAC is $12,408.23 less than that of Machine A

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Definitions:

Lapis Lazuli

A dark blue stone that undergoes metamorphosis, valued as a semi-precious gem for its vivid hue, cherished from ancient times.

Hydraulic Theory

In archaeology, the theory that explains civilization's emergence as the result of the construction of elaborate irrigation systems, the functioning of which required full-time managers whose control blossomed into the first governing body and elite social class; also known as irrigation theory.

Ecological

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Ani

In some beliefs, it refers to the soul or spirit of a deceased person or the inherent essence of an individual.