You are evaluating the purchase of either of two machines used in your brewery. Machine A will last two years, costs $8,000 initially, and then $1,250 per year in maintenance costs. Machine B costs $9,500 initially, has a life of three years, and requires $1,000 in annual maintenance costs. Either machine must be replaced at the end of its life with an equivalent machine. Your interest rate on current debt and the initial purchases is 9 percent and the tax rate is zero. Explain your processes and assumptions.

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