Precision Mfg

question 25

Multiple Choice

Precision Mfg.is trying to decide which one of two machines to purchase.Machine A costs $854,000,has a life of 8 years,and requires $147,000 in pretax annual operating costs.Machine B costs $798,000,has a life of 11 years,and requires $104,000 in pretax annual operating costs.Either machine will be depreciated using the straight-line method to zero over its life.Neither machine will have any salvage value.Whichever machine is selected,it will never be replaced.The discount rate is 13 percent and the tax rate is 35 percent.Which machine should be purchased and why?

• A)Machine A because its NPV is about $114,558 higher than Machine B's NPV
• B)Machine A because its NPV is about $64,217 higher than Machine B's NPV
• C)Machine A because its EAC is about $83,404 lower than Machine B's EAC
• D)Machine B because its NPV is about $95,188 higher than Machine A's NPV
• E)Machine B because its EAC is about $83,404 lower than Machine A's EAC

Acknowledge the expectation of positive operating cash flows and its significance.

Understand the investment strategies and constraints for mature companies.

Identify the importance and challenges of predicting loan default and bankruptcy through financial analysis.

Learn about the uses of financial analysis tools and the limitations of financial ratios.

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Definitions:

Balanced Equation

A chemical equation in which the number of atoms for each element is the same on both the reactant and product sides, indicating matter conservation.

NaCl

Sodium chloride, commonly known as table salt, an essential compound for both dietary and industrial uses.

Reaction Type

A category defining the nature of chemical reactions based on the rearrangement of atoms and changes in their bonding.

Reaction Type

Refers to the classification of chemical reactions based on their outcome or the change they involve, such as synthesis, decomposition, single replacement, or double replacement reactions.