Question: You can choose between Machine A or B. Your interest rate is 6%. You need a Machine for an infinite time.
a. Machine A costs $22,000 and lasts for 3 years. It has no salvage value and costs an additional $15,000 each year to operate.
b. Machine B costs $40, 500 and lasts for 4 years. It has a salvage value of $20,000 and costs $2,000/year to operate.
Can you use the AEW method? What is the Annual cost of the cheapest machine?