The Best Company Is Reviewing Two Options for Replacing a Piece

question 59

Multiple Choice

The Best Company is reviewing two options for replacing a piece of machinery. The first machine costs $86,500 and has a four-year life. The second machine costs $123,000 and has a six-year life. Neither machine will have a salvage value. The machines will be replaced at the end of their life. What method should be used to determine which machine to purchase?

• A) Net present value
• B) Internal rate of return
• C) Accounting rate of return
• D) Total cash flows
• E) Equivalent annual cost

---

Definitions:

Project Contract

A legally binding agreement between parties outlining the terms, conditions, and scope of a project.

Project Purpose Statement

A clear, concise statement that outlines the objectives and goals of a project, providing the project's team with direction.

Scope Of Work

A detailed document that outlines all the work to be performed under a contract, including tasks, deliverables, timelines, and standards.

Decision-Making Preference

An individual's favored approach or style when making decisions, which can vary widely among people.