Question

Mercil Corporation is going to buy one of the following two machines. Each machine meets the specifications for a particular task in the company. Mercil’s tax rate is 30 percent and its cost of capital is 15 percent. Which machine should Mercil buy and why?
Machine A: Costs $ 90,000 to acquire and $ 12,000 cash a year to operate in each year of its 10- year life. Annual depreciation is $ 9,000, and the machine has no salvage value.
Machine B: Costs $ 50,000 to acquire and $ 24,600 a year to operate in each year of its 10- year life. Annual depreciation is $ 5,000, and the machine has no salvage value.


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  • CreatedMarch 25, 2015
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