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:

Coronary Bypass

A surgical procedure to improve blood flow to the heart by redirecting blood around a section of a blocked or partially blocked artery in the heart.

Stent

A tube or other device inserted into a blocked passageway to keep it open, frequently used in arteries to prevent or relieve a blockage.

Blockage

Blockage refers to the obstruction or closing off of a passage or vessel, impeding or stopping the flow within it.

Cardiovascular Disease

A general term for conditions affecting the heart and blood vessels, such as coronary artery disease, heart attacks, and stroke.