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Which machine should it purchase

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Reference no: EM132708001

Question - A company must choose between two machines. Machine A costs $50 000 and the annual operating expenses are estimated to be $20 000, while Machine B costs $85 000 and has estimated annual operating expenses of $15 000. Both machines have a 10-year life and will have a zero residual value.

Required -

1. The company has a required rate of return of 10 per cent per annum. Which machine should it purchase?

2. Rework the problem for a 7 per cent required rate of return.

Reference no: EM132708001

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