A considering replacing a machine that manufactures bearings. The new improved machine (the challenger) will cost $320,000 installed and it will have a service life of 8 years. The salvage value at the end of 8 years is estimated to be $60,000. It is estimated that operating expenses with this new machine will average $100,000 a year.

The present machine (the defender) was purchased four years ago at $250,000 and from today, it is expected to have 8 more years of service life. In 8 years, it will have a salvage value of $10,000. Operating costs are $120,000 per year and the defender can be sold today for $100,000.

If both machines produce 10,000 bearings per year, use the annual equivalence method to determine the cost per bearing if the companys MARR is 8%. Should A purchase the new machine?