Cannula Vending Corporation is expanding operations and needs to purchase additional vending machines. There are currently two companies, Viscera, Inc. and Gullet International, that produce and sell machines that will do the job. Information related to the specifications of each company's machine are as follows (Ignore income taxes.): VisceraGulletPurchase price per machine$18,000 $24,000 Useful life of machine 5years 5yearsExpected salvage value of machine in 5 years$2,000 $5,000 Estimated annual operating cost per machine$4,000 $3,000 Refer to Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided.Cannula's discount rate is 18%. Cannula uses the straight-line method of depreciation. Using net present value analysis, which
company's machine should Cannula purchase and what is the approximate difference between the net present values of the competing company's machines?
A. Viscera, $3,438
B. Viscera, $1,562
C. Viscera, $1,749
D. Gullet, $127
Answer: B
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