You are trying to choose between purchasing one of two machines for a factory. Machine A costs $15,800 to purchase and has a three-year life. Machine B costs $17,600 to purchase but has a four year life. Regardless of which machine you purchase, it will have to be replaced at the end of its operating life. Assume a marginal tax rate of 35 percent and a discount rate of 14 percent.

Calculate the equivalent annual costs (EAC) of each machines.(Do not round intermediate calculations. Round answers to 2 decimal places, e.g. 15.27.)

Equivalent Annual Cost (EAC) of machine A$________

Equivalent Annual Cost (EAC) of machine B$___________

Which machine should you choose?

You should chooseMachine B or Machine A