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(Solved by Expert Tutors) Swanson, Inc. is considering the purchase of two machines. Machine A wil


costs
by $3,000 per year. Machine A has a salvage value of $3,500 after its seven year life. The other machine, Machine B,
will cost $10,000 and will produce a labor savings of $2,500 per year. Machine B has a salvage value of $4,000 after
its five year life. Machine A will require maintenance at the end of year five costing $3,000. Machine B will require
maintenance at the end of year three costing $2,000. Assume Swanson, Inc. employs a cost of capital of 15% on all
capital budgeting decision. Which machine(s) should Swanson, Inc. purchase? Ignore the effects of income taxes.

Question 4 options:
A)?

Machine A only

B)?

Machine B only

C)?

Both machine A and machine B

D)?

Neither machine A nor machine B


 


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DATE ANSWERED

Apr 19, 2020

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