Toni's Tools is comparing machines to determine which one to purchase. The machines sell for differing prices,have differing operating costs,differing machine lives,and will be replaced when worn out. These machines should be compared using:
A) net present value only.
B) both net present value and the internal rate of return.
C) their equivalent annual costs.
D) the depreciation tax shield approach.
E) the replacement parts approach.

Question

Quizplus · Accepted Answer

The equivalent annual cost (EAC) method is used to compare machines with different lifespans and costs by converting their costs into an annualized figure, making it easier to compare them directly.

Toni's Tools Is Comparing Machines to Determine Which One to Purchase