You Can Continue to Use Your Less Efficient Machine at a Cost

question 108

Multiple Choice

You can continue to use your less efficient machine at a cost of $8,000 annually for the next 5 years.Alternatively,you can purchase a more efficient machine for $12,000 plus $5,000 annual maintenance.At a cost of capital of 15%,you should:

• A) Buy the new machine and save $600 in equivalent annual costs.
• B) Buy the new machine and save $388 in equivalent annual costs.
• C) Keep the old machine and save $388 in equivalent annual costs.
• D)Keep the old machine and save $580 in equivalent annual costs.

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Definitions:

Contractual Capacity

The legal ability of a party to enter into a contract, including being of legal age and possessing a sound mind.

Binding Contract

An agreement between two or more parties that is legally enforceable.

Preprinted Terms

Agreements or forms that have standard conditions and text already printed on them before they are used, requiring only specific details to be added.

Handwritten Terms

Conditions or clauses manually written into a legal document or contract, which can sometimes hold precedence over printed text.