Bruno's,Inc

question 50

Multiple Choice

Bruno's,Inc. is analyzing two machines to determine which one it should purchase. The company requires a 14% rate of return and uses straight-line depreciation to a zero book value. Machine A has a cost of $290,000,annual operating costs of $8,000,and a 3-year life. Machine B costs $180,000,has annual operating costs of $12,000,and has a 2-year life. Whichever machine is purchased will be replaced at the end of its useful life. Which machine should Bruno's purchase and why? (Round your answer to whole dollars.)

• A) Machine A; because it will save the company about $8,600 a year
• B) Machine A; because it will save the company about $132,912 a year
• C) Machine B; because it will save the company about $200,000 a year
• D) Machine B; because it will save the company about $11,600 a year
• E) Machine B; because its equivalent annual cost is $199,759

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