Precision Tool Is Analyzing Two Machines to Determine Which One

question 56

Multiple Choice

Precision Tool is analyzing two machines to determine which one it should purchase.The company requires a 15 percent rate of return and uses straight-line depreciation to a zero book value over the life of its equipment.Machine A has a cost of $892,000,annual operating costs of $28,200,and a 4-year life.Machine B costs $1,118,000,has annual operating costs of $19,500,and has a 5-year life.Whichever machine is purchased will be replaced at the end of its useful life.Precision Tool should purchase Machine _____ because it lowers the firm's annual cost by approximately _______ as compared to the other machine.

• A)A; $12,380
• B)A; $17,404
• C)B; $16,965
• D)B; $17,404
• E)B; $17,521

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Definitions:

Glandular Tissue

A type of tissue found in glands of the body, responsible for secreting hormones or other substances.

Areola

The pigmented area surrounding the nipple of the breast.

Premature Telarche

The early development of breast tissue in girls before the typical age of puberty onset, without other signs of puberty.