Mercil Corporation is going to buy one of the following
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.
Membership TRY NOW
  • Access to 800,000+ Textbook Solutions
  • Ask any question from 24/7 available
    Tutors
  • Live Video Consultation with Tutors
  • 50,000+ Answers by Tutors
OR
Relevant Tutors available to help