A small manufacturing firm is considering purchasing a new boring machine to modernize one of its production lines. Two types of boring machine are available on the market. The machines are described by the following characteristics:
Item Machine A Machine B
First cost $7,234 $8,805
Service life 8 years 10 years
Salvage value $569 $1,026
Annual O&M costs $729 $606
CCA rate 30% 30%
Determine the break-even annual O&M costs for machine A so that the present worth of machine A is the same as that of machine B. Use a MARR (after tax) of 10% and a marginal tax rate of 30%.