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:

Hair Cells

Sensory cells found in the inner ear that convert sound vibrations into electrical signals, aiding in hearing and balance.

Olfactory Receptors

Specialized nerve cells in the nose involved in the sense of smell.

Audition

The perception or action of listening.

Vestibular Sense

A sensory system located in the inner ear that contributes to balance and spatial orientation by detecting changes in motion and gravitational forces.