Problem 10.21

You are trying to choose between purchasing one of two machines for a factory. Machine A costs $15,700 to purchase and has a three-year life. Machine B costs $18,000 to purchase but has a four-year life. Regardless of which machine you purchase, it will have to be replaced at the end of its operating life. Which machine should you choose? Assume a marginal tax rate of 35 percent and a discount rate of 13 percent. (Round answers to 2 decimal places, e.g. 15.25.)

Equivalent Annual Cost (EAC) of machine A ________.

Equivalent Annual Cost (EAC) of machine B_________.

Choose Machine A or Machine B ?