Technical Corp. is considering investment between two machines. They can either buy machine A that costs $100,000, with an annual EBIT of $90,000, that lasts for two years, or machine B that costs $150,000, with an annual EBIT of $90,000, that lasts for six years. Both of these investments are expansions. The firm receives the EBIT one-year after the investment has taken place, uses the straight-line depreciation method over the asset's life. The firm has an asset beta of 1.5, a negligible debt beta, yield to maturity on firm's debt is 5%., and it is 30% debt-financed. The market risk premium is 6%, the risk-free rate is 2%, and the tax rate is 25%.

a. What is the firms cost of equity capital? b. What is the firms weighted average cost of capital? c. Assume that the firm can make a one-time investment in either machine A or B. Which investment is better? d. Assume that the firm can only own one machine and replace it with the same machine after the machine's useful life ends. Which investment is a better choice? Use both replacement cost and EAA method.