Chemical Ltd has to decide between two machines, the more cost-effective of which be used to meet Chemical's factory ventilation requirements - which are a health and safety issue for Chemical's workforce.Both machines would be depreciated straight line to zero and have zero salvage value at the end of their lives.Chemical Ltd's cost of capital is 12 percent and the firm is carrying forward losses so its effective tax rate is zero.The inflation rate is also zero.

Machine A costs $4,200 and would have a lifespan of 7 years. Annual maintenance costs for A would be $600.

Machine B costs $6,000 and would have a lifespan of 11 years and would have annual maintenance costs of $200.

Required: Which machine should Chemical Ltd choose?