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Dylan and Co. is analyzing two machines to determine which one it should purchase. The company requires a 14% rate of return, has a 40% marginal tax rate, and uses straight-line depreciation to a zero book value, which is the expected salvage value after their lives. Machine A has a cost of $310,000, annual operating costs of $20,000, and a 4-year life. Machine B costs $210,000, has annual operating costs of $60,000, and has a 3-year life. Whichever machine is purchased will be replaced at the end of its useful life. Which machine should it purchase and why?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92865252

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