You Are Evaluating Two Different Cookie-Baking Ovens

question 53

Multiple Choice

You are evaluating two different cookie-baking ovens.The Pillsbury 707 costs $25,000,has a six-year life,and has an annual OCF (after tax) of −$5,000 per year.The Keebler CookieMunster costs $40,000,has a seven-year life,and has an annual OCF (after tax) of −$500 per year.If your discount rate is 10 percent,what is each machine's EAC?

• A) Pillsbury: −$11,594.94; Keebler: $8,716.22
• B) Pillsbury: −$11,594.94; Keebler: −$9,145.62
• C) Pillsbury: −$10,740.18; Keebler: −$9,145.62
• D) Pillsbury: −$10,740.18; Keebler: −$8,716.22

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Definitions:

Market Condition

Refers to the current state of a market including factors like supply and demand, economic indicators, and trends that affect the trading of goods and services.

Dishwasher Designs

The layout and features that are incorporated into the manufacturing of dishwashers, impacting functionality and user experience.

Expected Opportunity Loss

Expected opportunity loss is a decision-making tool, calculating the potential loss for not choosing the best course of action in uncertain situations.

Market Condition

The current status and dynamics of a market, including trends, demand, and competition.