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

Which machine would you choose? The two machines are mutually exclusive and the cost of capital is 15 percent.
A)Machine A, because the EAC is $1,789.89
B)Machine B, because the EAC is $1,922.88
C)Machine A, because it has lower PV costs
D)Machine B, because it has longer life

Question

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

Which machine would you choose? The two machines are mutually exclusive and the cost of capital is 15 percent.
A)Machine A, because the EAC is $1,789.89 
B)Machine B, because the EAC is $1,922.88 
C)Machine A, because it has lower PV costs 
D)Machine B, because it has longer life

Quizplus · Accepted Answer

The Economic Analysis of the Cost (EAC) for Machine A is lower than Machine B, which means that the cost of owning and operating Machine A is less expensive. Therefore, Machine A is the better choice.

Two Machines, a and B, Which Perform the Same Functions