Machine A was purchased three years ago for $10,000 and had an estimated MV of $1,000 at

Question:

Machine A was purchased three years ago for $10,000 and had an estimated MV of $1,000 at the end of its 10-year life. Annual operating costs are $1,000. The machine will perform satisfactorily for the next seven years. A salesperson for another company is offering Machine B for $50,000 with an MV of $5,000 after 10 years. Annual operating costs will be $600. Machine A could be sold now for $7,000, and MARR is 12% per year. Using the outsider viewpoint, what is the EUAC of buying Machine B? Choose the closest answer.

(a) $8,565

(b) $11,361

(d) $9,165

(e) $900

MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...

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