Equivalent Annual Cost (EAC) Problem
ACE Corporation is looking at buying three machines. Machine 1 will cost $20,000, have a useful life of 6 years, and will have costs of $4,500 annually. Machine 2 will cost $25,000, have a useful life of 8 years, and will have costs of $4,250 annually. Machine 3 will cost $18,000, have a useful life of 5 years, and will have costs of $4,600 annually. Which machine should ACE purchase if the discount rate is 10%?