Question
In: Finance
Burlington is analyzing two machines to determine which one it should purchase. Whichever machine is purchased...
Burlington is analyzing two machines to determine which one it should purchase. Whichever machine is
purchased will be replaced at the end of its useful life. The company requires a 13 percent rate of return and
uses straight-line depreciation to a zero book value over the life of the machine. Machine A has a cost of
$405,000, annual operating costs of $25,000, and a 3-year life. Machine B costs $324,000, has annual
operating costs of $28,000, and a 2-year life. The firm currently pays no taxes. Which machine should be
purchased and why?
A. Machine A;
because it will
save the
company
about $25,706
a year
B. Machine A;
because it will
save the
company
about $21,512
a year
C. Machine B;
because it will
save the
company about
$20,868 a year
D. Machine B;
because it will
save the
company about
$23,937 a year
E. Machine A;
because it will
save the
company
about
$24,109 a
year
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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