You Are Evaluating Two Different Machines

question 69

Multiple Choice

You are evaluating two different machines. Machine A costs $25,000, has a five-year life, and has an annual OCF (after tax) of -$6,000 per year. Machine B costs $30,000, has a seven-year life, and has an annual OCF (after tax) of -$5,500 per year. If your discount rate is 10 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:

Convenient

Describes something arranged or existing for ease and comfort or located in a way that makes it easy to reach.

Living Expenses

The costs associated with daily living, including housing, food, transportation, and utilities.

Live Alone

The act or state of residing in a dwelling by oneself without cohabitants.

Majority

The greater part or number; often used to denote the age at which a person gains full legal rights and responsibilities.