Landed Technologies has to choose between two machines that have the following costs associated with them: Machine A costs $30,000 upfront and $7,000 in maintenance costs each year; this machine can be used for 5 years at which time it will need to be replaced. Machine B costs $50,000 upfront and involves maintenance costs of $5,000 a year; it can be used for 8 years at which time it will need to be replaced. Both machines have no salvage value. Which machine should the firm purchaseif the discount rate is 10% ?
Calculate the EAC of each machine.