The firm is considering two machines: Machine A with initial investment of $10,000 and annual maintenance cost of $1,000. The life of the machine A is 4 years. Machine B with initial investment of $20,000 and annual maintenance cost of $800. The life of the machine B is 6 years. If the required rate of return is 10%, calculate the equivalent annual cost (EAC) of each machine and which machine company must choose? (A) The EAC of Machine A is $4,154.71 and Machine B is $5,392.15. The Company must choose Machine B. (B) The EAC of Machine A is $4,154.71 and Machine B is $5,392.15. The Company must choose Machine A. (C) The EAC of Machine A is $3,169.87 and Machine B is $3,484.21. The Company must choose Machine B. (D) The EAC of Machine A is $3,169.87 and Machine B is $3,484.21. The Company must choose Machine A.

The firm is considering two machines: Machine A with initial investment of $10,000 and annual maintenance cost of $1,000. The life of the machine A is 4 years. Machine B with initial investment of $20,000 and annual maintenance cost of $800. The life of the machine B is 6 years. If the required rate of return is 10%, calculate the equivalent annual cost (EAC) of each machine and which machine company must choose? (A) The EAC of Machine A is $4,154.71 and Machine B is $5,392.15. The Company must choose Machine B. (B) The EAC of Machine A is $4,154.71 and Machine B is $5,392.15. The Company must choose Machine A. (C) The EAC of Machine A is $3,169.87 and Machine B is $3,484.21. The Company must choose Machine B. (D) The EAC of Machine A is $3,169.87 and Machine B is $3,484.21. The Company must choose Machine A.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PB: Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated...

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