You are considering the purchase of one of two machines used in your manufacturing plant. Machine A has a life of two years, costs $165 initially, and then $90 per year in maintenance costs. Machine B costs $235 initially, has a life of three years, and requires $185 in annual maintenance costs. Either machine must be replaced at the end of its life with an equivalent machine.

The discount rate is 13 percent and the tax rate is zero. Calculate the EAC

Which one should you choose?

Machine B

Machine A