The Fairmont Hotel in San Francisco needs to replace its air conditioning system. There are two alternatives, both of which can do the job equally well:

Machine name	AC 1	AC 2
Purchase price	$40,000	$60,000
Operating cost (end of each year)	$17,000	$8,000
Useful life (years)	4	6
Straight line depreciation to zero over (years)	4	6
Salvage value at end of useful life	$0	$0

The relevant discount rate is 10% and the marginal tax rate is 35%.

What is the operating cash flow for AC 1 per year? What is the equivalent annual cost for AC 1 (in absolute terms)? What is the operating cash flow for AC 2 per year? What is the equivalent annual cost for AC 2 (in absolute terms)?