The Sienna Company has to choose between two machines that do the same job but have

different lives. The two machines have the following costs $($expressed in real terms$)$:

a$.$ Suppose you are Sienna's financial manager. If you had to buy one or the other machine

and rent it to the production manager for that machine's economic life, what annual rental

payment would you have to charge? Assume a $6$ percent real discount rate and ignore

taxes.

b$.$ Which machine should Sienna buy?

c$.$ Usually, the rental payments you derived in part $($a$)$ are just hypothetical $-$ a way of

calculating and interpreting equivalent annual cost. Suppose you actually do buy one of

the machines and rent it to the production manager. How much would you actually have

to charge in each future year if there is steady $8$ percent per year inflation?