Suppose that you are trying to choose one of two possible machines for your factory. You will need to operate the machine over the next 6 years. The first possibility is a machine that costs $1 million today. It will be scrapped after 6 years. The maintenance of the machine will cost you $150,000 in year 3. The second possibility is a machine that costs $600,000 today and has a life of only 3 years, but requires no maintenance. You expect to be able to replace the machine in 3 years at its current price of $600,000. a. Calculate the present value of the costs associated with the 2 machines for various discount rates: 2%, 4% and 6%. b. Either of the machines can generate a 6-year cash flow annuity with the first cash flow arriving one year from today. For both machines, obtain the minimum annuity cash flow that would make the machine investment a profitable investment if the discount rate were 6%

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a To calculate the present value of costs associated with the two machines for various discount rates 2 4 and 6 we need to consider the initial cost m... View the full answer