You Are Trying to Pick the Least-Expensive Machine for Your

question 93

Multiple Choice

You are trying to pick the least-expensive machine for your company.You have two choices: machine A,which will cost $50,000 to purchase and which will have OCF of −$3,500 annually throughout the machine's expected life of three years; and machine B,which will cost $75,000 to purchase and which will have OCF of −$4,900 annually throughout that machine's four-year life.Both machines will be worthless at the end of their life.If you intend to replace whichever type of machine you choose with the same thing when its life runs out,again and again out into the foreseeable future,and if your business has a cost of capital of 14 percent,which one should you choose?

• A) Machine A
• B) Machine B
• C) Both machines A and B
• D) Neither machine A nor B

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Definitions:

Disappointing News

Information that fails to meet expectations or hopes, leading to a feeling of dissatisfaction.

Internal Crisis

A significant problem or emergency that occurs within an organization, impacting its operations, reputation, or stability.

Office Grapevine

Denotes the informal and unofficial communication network within an organization.

Persuasive Request

A communication aimed at convincing the recipient to agree with a proposal or view through reasoning and appeal.