$.$ PMG Inc. considers to purchase new machines and has two options; Model T$-8$ and Model M$-6.$ The followings are the cash flows for the two machines.

Year Model T$-8$ Model M$-6$

$0($$$200,000)($$$380,000)$

$1$ $$92,00098,000$

$292,00098,000$

$392,00098,000$

$498,000$

$598,000$

$698,000$

Assume the cost of capital is $12\%,$ What is the NPV of the two machines. Assume that the company can purchase a new Model T$-8$ machine for another $3$ years with exactly the same initial cost and $3-$year cash inflows. What is the NPV of Model T$-8$ on a $6-$year extended basis? Which new machine should it purchase based on the replacement chain approach? What is the equivalent annual annuity for each machine? Please explain how to solve using financial calculator