Toni's Tools Is Comparing Machines to Determine Which One to Purchase.The

question 67

Multiple Choice

Toni's Tools is comparing machines to determine which one to purchase.The machines sell for differing prices,have differing operating costs,differing machine lives,and will be replaced when worn out.These machines should be compared using

• A)net present value only.
• B)both net present value and the internal rate of return.
• C)the replacement parts approach.
• D)the depreciation tax shield approach.
• E)the equivalent annual cost method.

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Definitions:

Compounded Annually

Describes interest on an investment or loan calculated once a year on both the initial principal and the accumulated interest from previous periods.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, reflecting the time value of money.

Cash Equivalent Price

The value of an asset that is readily convertible into a known amount of cash with negligible risk of changes in value.

Acquisition Date

The specific date on which an acquisition or takeover of one entity by another is officially completed.