Question

Mariposa Inc is considering improving its production process by acquiring a new machine. There are two...

Mariposa Inc is considering improving its production process by acquiring a new machine. There are two machines management is analyzing 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 Mariposa purchase and why? (Round your answer to whole dollars.)

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