There are two alternative machines for a manufacturing process. Both machines have the same output rate, but they differ in costs. Machine A costs $20,000 to set up and $8,000 per year to operate. It must be completely replaced every 3 years, and it has no salvage value. Machine B costs $50,000 to set up and $2,160 per year to operate. It should last for 5 years and has no salvage value. The costs of two machines are shown below.

0

1

2

3

4

5

Machine A

20,000

8,000

8,000

8,000

Machine B

50,000

2,160

2,160

2,160

2,160

2,160

Assuming the cost of capital is 10%,

1. find the equivalent annual cost of Machine A in Box 1. Round it to a whole dollar, and no comma or the dollar sign.

2. find the EAC of Machine B in Box 2. The same format as box 1.

3. Based on the equivalent annual cost method, type in Box 3 which machine do you recommend, Machine A or Machine B.