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2. You are considering the purchase of one of two machines required in your production process. Machine A has a life of two years. Machine
2. You are considering the purchase of one of two machines required in your production process. Machine A has a life of two years. Machine A costs $50 initially and then $70 per year in maintenance. Machine B has an initial cost of $90. It requires $40in maintenance for each year of its three-year life. Eithermachine must bereplaced at the end of its life. The discount rates 10% and the tax rate is zero. Based on equivalent annual costs, which isthe better machine for the firm? Why
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