Your company is considering buying one of the two machines into product line. These two...
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Finance
Your company is considering buying one of the two machines into product line. These two machines have different initial costs, annual operating costs, and different length of lives as following.
Machine A: Initial costs of $20,000; annual costs of $2,000 for 5 years
Machine B: Initial costs of $30,000; annual costs of $1,000 for 8 years
The cost of capital is 10%. What are their equivalent annual costs (EACs)? If you want to have lower average annual cost, which machine should you choose?
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