One year ago, Machine A was purchased for $15,000, to be used for 5 years. The machine has not performed as expected, and it costs $750 per month for repairs, adjustments, and downtime. Machine B, designed to perform the same functions, can be purchased for $25,000 with monthly costs of $75. The expected life of machine B is 5 years. Operating costs are substantially equal for the two machines, and salvage values for both are negligible. If 6% is used, the incremental annual net equivalent of Machine B is nearest to a. $2165 b. $2886 c. $4539 d. $5260
One year ago, Machine A was purchased for $15,000, to be used for 5 years. The machine has not performed as expected, and it costs $750 per month for repairs, adjustments, and downtime. Machine B, designed to perform the same functions, can be purchased for $25,000 with monthly costs of $75. The expected life of machine B is 5 years. Operating costs are substantially equal for the two machines, and salvage values for both are negligible. If 6% is used, the incremental annual net equivalent of Machine B is nearest to a. $2165 b. $2886 c. $4539 d. $5260
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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One year ago, Machine A was purchased for $15,000, to be used for 5 years. The machine has not performed as expected, and it costs $750 per month for repairs, adjustments, and downtime. Machine B, designed to perform the same functions, can be purchased for $25,000 with monthly costs of $75. The expected life of machine B is 5 years. Operating costs are substantially equal for the two machines, and salvage values for both are negligible. If 6% is used, the incremental annual net equivalent of Machine B is nearest to a. $2165 b. $2886 c. $4539 d. $5260
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