You are the financial manager of a firm that operates a large machine park. You are considering replacing an old machine that costs $120,000 at the end of every year to operate and you expect it to operate for two more years. The new machine requires an initial investment of $250,000 and costs you $80,000 at the end of every year to operate. The new machine is expected to last for 5 years. Assume an interest rate of 6% per year. Answer the questions on the right side. Enter all answers rounded to the nearest whole dollar

a. What is the EAA cost of the old machine? Enter your answer as a positive number and rounded to the nearest whole dollar

b. What is the EAA cost of the new machine? Enter your answer as a positive number and rounded to the nearest whole dollar

c. Should you replace the old machine now or keep it for two more years?

- No, keep the old machine for two more years

- You are indifferent between the old and the new machine

- Yes, replace the old machine