Toni's Tools is comparing machines to determine which one to purchase.The machines sell for differing prices,have differing operating costs,differing machine lives,and will be replaced when worn out.These machines should be compared using

Question

Quizplus · Accepted Answer

The equivalent annual cost method allows for the comparison of machines with differing operating costs, machine lives, and replacement periods by converting all costs (initial, operating, and replacement) and benefits (resale value) into an equivalent annual amount. This allows for a more accurate comparison of the cash flows associated with each machine and helps to determine which machine is the most cost-effective. The net present value and internal rate of return methods are also useful, but they do not explicitly consider the replacement of the machines, which is an important consideration for long-term investment decisions.

Toni's Tools Is Comparing Machines to Determine Which One to Purchase.The