You Are Evaluating Two Different Machines

question 97

Multiple Choice

You are evaluating two different machines. Machine A costs $10,000, has a five-year life, and has an annual OCF (after tax) of -$2,500 per year. Machine B costs $15,000, has a seven-year life, and has an annual OCF (after tax) of -$2,000 per year. If your discount rate is 14 percent, using EAC which machine would you choose?

• A)Machine A
• B)Machine B
• C)Both machines A and B
• D)Neither machine A nor B

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Definitions:

Acquiring Corporation

A company that purchases or acquires another company, either in part or entirely.

Voting Shares

Voting shares are shares of a company's stock that grant the shareholder the right to vote on the company's matters, typically in influencing the election of the board of directors.

Aggressors

Aggressors are individuals or entities that initiate hostility or conflict, often without provocation.

Institutional Investors

Organizations that invest large sums of money into securities, real estate, and other investment assets.