Which machine should be chosen

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Question - Brand Wrapper Pty Ltd is considering the purchase of a new machine. Machine A costs $300,000, has an annual cash operating cost of $145,000 and will last for 6 years. Machine B has a cost of $450,000 million, annual cash operating cost of $140,000 million and a 9-year life. The sales for each machine will be $500,000 per year. The required return is 10 percent and the tax rate is 30 percent. Both machines will be depreciated to zero on a straight-line basis over their lives.

If the company plans to replace the machine when it wears out on a perpetual basis, which machine should be chosen? Please round up your answer to zero decimal places and fill you answers in the blank cell for each part.

Reference no: EM132622536

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