Problemyou are considering the purchase of one of two, Ask an Expert

Accounting

Problem:

You are considering the purchase of one of two machines used in your manufacturing plant. Machine A has a life of two years, costs $100 initially, and then $55 per year in maintenance costs. Machine B costs $150 initially, has a life of three years, and requires $25 in annual maintenance costs. Either machine must be replaced at the end of its life with an equivalent machine.

Requirement:

Question: What is the EAC of the better machine for the firm? The discount rate is 10% and the tax rate is zero.

-$85.32
-$195.45
-$112.62
-$75.62

Note: Show supporting computations in good form.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91172408

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