If two machines produce the same product but have different lives,you should choose the machine with the:
A) highest IRR.
B) longest life.
C) lowest equivalent annual cost.
D) highest NPV, discounted at the opportunity cost of capital.

Question

Quizplus · Accepted Answer

When comparing machines with different lives, the Equivalent Annual Cost (EAC) method is the most appropriate. The EAC method calculates the annual cost of each machine over its useful life, making it a comparable metric. Therefore, the machine with the lowest EAC should be chosen as it represents the least expensive option per year over the useful life of the machine.

If Two Machines Produce the Same Product but Have Different