Using the EAC method and a cost of capital of 12%, make a recommendation for which machine should be purchased.

Machine A costs $40,000, has a 6 year life, and has after-tax operating expenses of $3,000 per year (years t = 1 through t = 6). 

Machine B costs $37,000, has a 7 year life, and has after-tax operating expenses of $3,500 per year (years t = 1 through t = 7). 

Answer rating: 100% (QA)

To determine which machine should be purchased using the Equivalent Annual Cost EAC method we need t... View the full answer