You Are Considering the Purchase of One of Two Machines

question 69

Multiple Choice

You are considering the purchase of one of two machines required in your production process. Machine A has a life of two years. Machine A costs $50 initially and then $70 per year in maintenance. Machine B has an initial cost of $90. It requires $40 in maintenance for each year of its 3 year life. Either machine must be replaced at the end of its life. Which is the better machine for the firm? The discount rate is 15% and the tax rate is zero.

• A) Machine A as EAC for Machine A is $100.76
• B) Machine B as EAC for Machine B is $79.42
• C) Machine A as PV of costs for Machine A is $163.80
• D) Machine B as PV of costs for Machine B is $181.33

Comprehend the legal implications of unauthorized signatures and their ratification.

Recognize the conditions under which alterations to promissory notes affect liability.

Understand the roles and liabilities of agents and principals concerning negotiable instruments.

Learn about real and personal defenses applicable to negotiable instruments.

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Definitions:

Capital Lease Disclosures

Financial reporting requirements that detail the specifics of lease agreements classified as capital leases, including future payment obligations and interest expenses.

Lessees

Parties that obtain the right to use an asset for a specific period in exchange for payment, under a lease agreement.

Implicit Interest Rate

The rate that equates the present value of lease payments and any unguaranteed residual value to the fair value of the leased asset.

Income Report

An income report, commonly known as an income statement, is a financial document that shows a company's revenue, expenses, and net income over a specific period.