Question: Question 4 You need to choose between two machines based on the following information: Machine 1 has a 3 year life, costs $350,000 with pre-tax

Question 4 You need to choose between two machines based on

Question 4 You need to choose between two machines based on the following information: Machine 1 has a 3 year life, costs $350,000 with pre-tax operating costs of $75,000 per year. Machine 2 has a 5 year life, costs $500.000 with pre-tax operating costs of $37,500 per year. Both machines have a salvage value of $25,000 and are classed with a CCA rate of 20% per year. The company tax rate is 32% and the discount rate is 12%. a) What is the EAC? b) Which machine would you select as an investment? Hint: Do not ignore CCA or take positive value for outflows when finding NPV Show your work below (you must show all calculations used to derive you answers)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

please answer the question fully and clearly. You need to choose between two machines based on the following information: Machine 1 has a 4 year life, costs 8922,500 with pre-tax operating costs of...

Q:

You need to choose between two machines based on the following information: Machine 1 has a 4 year life, costs $322,500 with pre-tax operating costs of $64,500 per year. Machine 2 has a 3 year life,...

Q:

You need to choose between two machines based on the following information: Machine 1 has a 4 year life, costs $322,500 with pre-tax operating costs of $64,500 per year. Machine 2 has a 3 year life,...

Q:

You need to choose between two machines based on the following information: Machine 1 has a 4 year life, costs $ 3 2 2 , 5 0 0 with pre - tax operating costs of $ 6 4 , 5 0 0 per year. Machine 2 has...

Q:

You need to choose between two machines based on the following information: Machine 1 has a 4 year life, costs $322,500 with pre-tax operating costs of $64,500 per year. Machine 2 has a 3 year life,...

Q:

You need to choose between two machines based on the following information: Machine 1 has a 4 year life, costs $322,500 with pre-tax operating costs of $64,500 per year. Machine 2 has a 3 year life,...

Q:

You need to choose between two machines based on the following information: Machine 1 has a 4 year life, costs $322,500 with pre-tax operating costs of $64,500 per year. Machine 2 has a 3 year life,...

Q:

You need to choose between two machines based on the following information: Machine 1 has a 4 year life, costs $322,500 with pre-tax operating costs of $64,500 per year. Machine 2 has a 3 year life,...

Q:

You need to choose between two machines based on the following information: Machine 1 has a 4 year life, costs $322,500 with pre-tax operating costs of $64,500 per year. Machine 2 has a 3 year life,...

Q:

The expert copied another experts answer without explaining A and B. You need to choose between two machines based on the following information: Machine 1 has a 4 year life, costs $322,500 with...

Q:

What mechanism (procedures) has the company established to manage the internal whistle blowing process?

Q:

Give a brief history of the income tax in the United States.

Q:

1 4 1 - a d 4 9 - 9 0 f 5 c 9 s 0 e 2 7 7 w e k d = 7 0 9 2 Question 7 Which of the following is not a goal of the Federal Deposit insurance Corporation ( FDIC ) ? Select one: Insure deposits....

Q:

Draw a class diagram and its relationship based on the following statements. You can use any UML tool/software to represent your class diagram. Do NOT copy and paste your diagram, use the attachment...