Duke Corporation is analyzing two machines to determine which one it should purchase. Whichever machine is purchased will be replaced at the end of its useful life. The company requires a 12 percent rate of return and uses straight-line depreciation to a zero book value over the life of the machine. Machine A has a cost of $405,000, annual operating costs of $21,000, and a 3-year life. Machine B costs $276,000, has annual operating costs of $33,000, and a 2-year life. The firm currently pays no taxes. Which machine should be purchased and why?

Machine A; because it will save the company about $6,687 a year

Machine A; because it will save the company about $8,251 a year

Machine B; because it will save the company about $5,947 a year

Machine B; because it will save the company about $7,380 a year

Machine A; because it will save the company about $7,506 a year