You Have Been Asked to Evaluate Two Machines

question 15

Multiple Choice

You have been asked to evaluate two machines. The benefits from ownership are identical. Machine A costs $300 to buy and install, lasts for 5 years, and costs $160 per year to operate. Machine B costs $500, lasts for 7 years, and costs $120 per year to operate. Both machines have zero salvage value. Assuming that this is a one-time acquisition, which machine do you recommend if the cost of capital is 15%?

• A) Machine A, the PV is $163 more than Machine B.
• B) Machine A, the PV of its costs is $163 less than Machine B.
• C) Machine A, because the project length is two years less than Machine B.
• D) Machine B, the PV is $163 more than Machine A.
• E) Machine B, the PV of its costs is $163 less than Machine A.

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Definitions:

Social Media Accounts

Profiles or identities created on platforms designed for social interaction, content sharing, and networking online.

Unauthorized Communication

The sharing of information that has not been approved or is forbidden, often breaching privacy or security protocols.

Academic Exercise

A theoretical task or activity designed to enhance learning or develop intellectual skills.

Cheating

Acting dishonestly or unfairly in order to gain an advantage, especially in a learning environment.