Question: Please help with this multiple choice question PFM Plc is considering the purchase of a new machine. It has identified two possible machines with initial
PFM Plc is considering the purchase of a new machine. It has identified two possible machines with initial costs and expected cash savings per year as follows: Co CE Cz C; C4 Cs -20,000 3,000 5,500 6,000 7,200 4,000 Machine A Machine B -20,000 5,000 6,500 7,300 5,000 = Machine A has a useful life of 5 years while machine B has a useful life of 4 years. Neither of these machines has any residual value at the end of their lives. The two machines are mutually exclusive. The opportunity cost of capital for PFM Plc is 5% per year. If PFM Plc is going to replace the chosen machine each time when it reaches the end of its useful life, which machine would you recommend the management to invest? A. The equivalent annual values of machine A, B are 482.7 and 304, respectively. A should be bought B. The equivalent annual values of machine A, B are 500 and 677, respectively. B should be bought C. The equivalent annual costs of machine A, B are 482.7 and 304, respectively. B should be bought D. The equivalent annual costs of machine A, B are 468.5 and 455, respectively. B should be bought
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