Bruno SpA is analyzing two machines to determine which one it should purchase.The company requires a 14% rate of return and uses straight-line depreciation to a zero book value.Machine A has a cost of €290,000,annual operating costs of €8,000,and a 3-year life.Machine B costs €180,000,has annual operating costs of €12,000,and has a 2-year life.Whichever machine is purchased will be replaced at the end of its useful life.Which machine should Bruno's purchase and why? (Round your answer to whole euros.)
A) Machine A; because it will save the company about €8,600 a year
B) Machine A; because it will save the company about €132,912 a year
C) Machine B; because it will save the company about €200,000 a year
D) Machine B; because it will save the company about €11,600 a year
E) Machine B; because its equivalent annual cost is €199,759
Correct Answer:
Verified
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