Bruno's, Inc. is analyzing two machines to determine which one they should purchase. The company requires a 14% rate of return, each machine belongs in a 30% CCA class, and the firm faces a tax rate of 35%. Machine A has a cost of $290,000, annual operating costs of $8,000, and a 3-year life. Machine B costs $180,000, has annual operating costs of $12,000, and has a 2-year life. Whichever machine is purchased will be replaced at the end of its useful life. Which machine should Bruno's purchase and why? (Assume that both machines have zero salvage value at the end of their useful lives.) Multiple Choice machine B; because its equivalent annual cost is $192,000 machine B; because it will save the company about $92,628 a year machine B; because it will save the company about $9,506 a year machine A: because it will save the company about $102,134 a year machine A; because it will save the company about $8,600 a year

Bruno's, Inc. is analyzing two machines to determine which one they should purchase. The company requires a 14% rate of return, each machine belongs in a 30% CCA class, and the firm faces a tax rate of 35%. Machine A has a cost of $290,000, annual operating costs of $8,000, and a 3-year life. Machine B costs $180,000, has annual operating costs of $12,000, and has a 2-year life. Whichever machine is purchased will be replaced at the end of its useful life. Which machine should Bruno's purchase and why? (Assume that both machines have zero salvage value at the end of their useful lives.) Multiple Choice machine B; because its equivalent annual cost is $192,000 machine B; because it will save the company about $92,628 a year machine B; because it will save the company about $9,506 a year machine A: because it will save the company about $102,134 a year machine A; because it will save the company about $8,600 a year

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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