Bruno's Is Analyzing Two Machines to Determine Which One It

Bruno's is analyzing two machines to determine which one it should purchase.The company requires a rate of return of 14.6 percent and uses straight-line depreciation to a zero book value over a machine's life.Ignore bonus depreciation and taxes.Machine A has a cost of $318,000,annual operating costs of $8,700,and a life of 3 years.Machine B costs $247,000,has annual operating costs of $9,300,and a life of 2 years.Whichever machine is purchased will be replaced at the end of its useful life.Which machine should Bruno's purchase and why?

A) Machine A; because it will save the company about $13,406 a year
B) Machine A; because it will save the company about $18,100 a year
C) Machine B; because it will save the company about $16,510 a year
D) Machine B; because it will save the company about $11,609 a year
E) $154,224.08

Correct Answer:

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