Dan Is Comparing Three Machines to Determine Which One to Purchase.The

question 2

Multiple Choice

Dan is comparing three machines to determine which one to purchase.The machines sell for differing prices,have differing operating costs,differing machine lives,and will be replaced when worn out.Which one of the following computational methods should Dan use as the basis for his decision?

• A)internal rate of return
• B)operating cash flow
• C)equivalent annual cost
• D)depreciation tax shield
• E)bottom-up operating cash flow

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Definitions:

Store of Value

An asset that can be saved, retrieved, and exchanged at a later time, and is predictably useful when retrieved.

Liquidated

The process of converting assets into cash or other forms of payment, often used in bankruptcy proceedings.

Interest Income

Earnings received from deposit accounts or investments such as bonds, loans where one lends money to someone else in exchange for a return of interest.

Currency Notes

Paper money issued by a country's central bank or government as legal tender for transactions.