A small manufacturing firm is considering the purchase of a new boring machine to modernize one of its production lines. Two types of boring machine are available on the market. The lives of machine A and machine B are 8 years and 10 years, respectively. The machines have the following receipts and disbursements. Use a MARR (after-tax) of 15% and a marginal tax rate of 40% Item Machine A Machine B First cost Service life Salvage value Annual O&M costs $6,500 8 years $8,000 10 years 1000 500 800 650 DB (30%) DB (30%) (a) Which machine would be most economical to purchase? (b) Determine the break-even annual O&M costs for machine A so that the present worth of machines A and B is the same. (c) Suppose that the required service life of the machine is only 5 years. The estimated salvages at the end of the required service period are estimated to be $2,500 for machine A and $3,000 for machine B, respectively. Which machine is more economical?