You Are Considering the Purchase of One of Two Machines

question 17

Multiple Choice

You are considering the purchase of one of two machines used in your manufacturing plant. Machine A has a life of two years, costs $20,000 initially, and then $4,000 per year in maintenance costs. Machine B costs $25,000 initially, has a life of three years, and requires $3,500 in annual maintenance costs. Either machine must be replaced at the end of its life with an equivalent machine. Which is the better machine for the firm? The discount rate is 14 percent and the tax rate is zero.

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

---

Definitions:

Internal Processes

Internal processes involve the cognitive, psychological, and physiological operations that underlie an individual's mental and emotional functioning.

Behaviorists

Behaviorists focus on observable behaviors and the ways they're learned, downplaying the role of internal thoughts and feelings.

Gestalt Psychologists

Psychologists who believe that human perception and behavior should be understood as organized wholes, rather than the sum of their parts.

Observable Behaviors

Actions or reactions of an organism that can be seen and measured.