Two machines, A and B, which perform the same functions, have the following costs and lives. B

Type PV Costs Life Machine A $5,000 3 years Machine B $6,500 5 years

If the cost of capital were 15%, which machine would you choose?

Question 21 options:

	Machine A because the EAC(effective annual cost) is $2,189.88.
	Machine B because the EAC(effective annual cost) is $1939.05.
	Machine A because it has lower PV costs.
	Machine B because it has longer life.
	Machine B because the annual cost is $1,300.00.
	Machine A because the annual cost is $1,666.67.

Your boss asked you to evaluate a project with an infinite life. Sales and costs project to $1,200 and $600 per year, respectively. (Assume sales and costs occur at the end of the year, i.e., profit of $600 at the end of year one.) There is no depreciation and the tax rate is 30%. The real required rate of return is 15%. The inflation rate is 4% and is expected to be 4% forever. Sales and costs will increase at the rate of inflation. If the project costs $2,500, what is the NPV?

Question 23 options:

	$1,500.00
	$375.98
	$300.00
	$425.88