Question: You are considering the purchase of one of two machines used in your manufacturing plant. Machine A has a life of two years, costs $125 initially, and then $170 per year in maintenance costs. Machine B costs $195 initially, has a life of three years, and requires $145 in annual maintenance costs. Either machine must be replaced at the end of its life with an equivalent machine.
The discount rate is 12 percent and the tax rate is zero. Calculate the EAC. (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)
EAC
Machine A $
Machine B $
Which one should you choose?
Machine A
Machine B