Problem 10-18 Unequal Lives

Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting machine. Two new models are available: Machine 190-3, which has a cost of $225,000, a 3-year expected life, and after-tax cash flows (labor savings and depreciation) of $95,200 per year; and Machine 360-6, which has a cost of $324,000, a 6-year life, and after-tax cash flows of $91,800 per year. Knitting machine prices are not expected to rise, because inflation will be offset by cheaper components (microprocessors) used in the machines. Assume that Filkins' cost of capital is 11.65%.

Calculate the eqivalent annual annuity of Macnine 190-3 and Machine 190-6?