You Are Evaluating Two Different Machines

question 121

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

Comprehend the nature and impact of adjusting and closing entries on financial statements.

Recognize the differences between the accrual basis and the cash basis of accounting.

Identify the characteristics and treatment of specific accounts such as Accumulated Depreciation, Prepaid Expenses, and Liabilities.

Grasp the concept of the time period assumption in accounting and its implications for the preparation of financial statements.

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Definitions:

Salaried Manager

A manager who is paid a fixed annual amount rather than an hourly wage, often receiving benefits such as healthcare.

Employment Contract

An employment contract is a legally binding agreement between an employer and an employee that outlines the terms of employment.

Total Cost

The total expense of manufacturing, encompassing both constant and fluctuating costs.

Marginal Cost

The financial impact of producing an additional unit of a product or service.