JADO Mfgis Trying to Decide Which One of Two Machines to to Purchase.Machine

question 26

Multiple Choice

JADO Mfg.is trying to decide which one of two machines to purchase.Machine A costs $421,000,has a 5-year life,and requires $108,000 in pretax annual operating costs.Machine B costs $589,000,has a 4-year life,and requires $92,000 in pretax annual operating costs.Either machine will be depreciated using the straight-line method to zero over its life.Neither machine will have any salvage value.Whichever machine is selected,it will never be replaced.The discount rate is 13 percent and the tax rate is 35 percent.Which machine should be purchased and why?

• A)Machine A;because its NPV is about $49,320 higher than Machine B's NPV
• B)Machine A;because its NPV is about $38,319 higher than Machine B's NPV
• C)Machine A;because its EAC is about $89.989 lower than Machine B's EAC
• D)Machine B;because its EAC is about $68,360 lower than Machine A's EAC
• E)Machine B;because its NPV is about $45,880 higher than Machine A's NPV

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Definitions:

Standard Socket

A tool attachment designed to fit onto a wrench, allowing the wrench to tighten or loosen bolts and nuts of standard sizes.

Screw Pitch Gauge

A toothed template gauge used for measuring screw pitch or threads per inch (tpi).

Threads Per Inch

A measure of the thread density in fasteners, indicating how many threads are present within an inch length of the screw.

Thread Angle

Refers to the angle between the sides of the thread profile on a screw or threaded component, typically measured in degrees.