You Are Evaluating Two Different Machines

question 78

Multiple Choice

You are evaluating two different machines.Machine A costs $25,000,has a five-year life,and has an annual OCF (after tax) of −$6,000 per year.Machine B costs $30,000,has a seven-year life,and has an annual OCF (after tax) of −$5,500 per year.If your discount rate is 10 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

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Definitions:

Personality Variable

A factor within an individual that reflects distinctive patterns of thought, emotion, and behavior, contributing to unique habits and attitudes.

Lipstick Effect

The economic theory that suggests consumers will spend more on small indulgences during economic downturns, maintaining purchases of luxury or non-essential items despite a lower overall spending capacity.

Ovulatory Cycle

The recurring physiological changes in the female reproductive system that lead to ovulation, part of the menstrual cycle.

Economic Times

Refers to the prevailing conditions of an economy at a certain period, affecting employment, consumer confidence, and financial markets.