Bruno's,Inc

Multiple Choice

Bruno's,Inc. is analyzing two machines to determine which one it should purchase. The company requires a 14% rate of return and uses straight-line depreciation to a zero book value. Machine A has a cost of $290,000,annual operating costs of $8,000,and a 3-year life. Machine B costs $180,000,has annual operating costs of $12,000,and has a 2-year life. Whichever machine is purchased will be replaced at the end of its useful life. Which machine should Bruno's purchase and why? (Round your answer to whole dollars.)

A) Machine A; because it will save the company about $8,600 a year
B) Machine A; because it will save the company about $132,912 a year
C) Machine B; because it will save the company about $200,000 a year
D) Machine B; because it will save the company about $11,600 a year
E) Machine B; because its equivalent annual cost is $199,759