Two Machines, a and B, Which Perform the Same Functions

question 43

Multiple Choice

Two machines, A and B, which perform the same functions, have the following costs and lives. $\begin{array} { c c c } \text { Type } & \text { PV Costs } & \text { Life } \\\text { Machine A } & \$ 6,000 & 5 \\\text { Machine B } & \$ 8,000 & 7\end{array}$ Which machine would you choose? The two machines are mutually exclusive and the cost of capital is 15 percent.

• A)Machine A, because the EAC is $1,789.89
• B)Machine B, because the EAC is $1,922.88
• C)Machine A, because it has lower PV costs
• D)Machine B, because it has longer life

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