Answered: Machine First Cost, $ АОС, $ 1 -28,000…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Old Southwest Canning Co. has determined that any one of four machines can be used in a certain phase of its chili-canning operation. The first costs
and annual operating costs (AOC) are estimated below, and all machines have a 5-year life. The MARR is 25% per year. (a) Determine which machine should be selected on the basis of a rate of return analysis. (b) Use a spreadsheet to perform PW analysis of each machine. Compare the machine selections with that of the ROR analysis.

Machine
First Cost, $
АОС, $
1
-28,000
- 20,000
- 12,000
- 19,000
2
-51,000
3
-32,000
4
-33,000
- 18,000

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