Question: There are two alternative machines for a manufacturing process. Both machines have the same output rate, but they differ in costs. Machine A costs $3,000

There are two alternative machines for a manufacturing process. Both machines have the same output rate, but they differ in costs. Machine A costs $3,000 to set up and $900 per year to operate It must be completely replaced every 3 years, and it has no salvage value. Machine B costs $7,000 to set up and $300 per year to operate. Note that these operating costs are all after-tax, and they include depreciation tax-shields. It should last for 5 years and has no salvage value. The costs of two machines are shown below. Based on the equivalent annual cost method (EAC), which machine do you recommend if the cost of capital is 13%? 

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