You are operating an old machine that is expected to produce a cash inflow of $$5,000$ in each of the next three years before it fails.

You can replace it now with a new machine that costs $$20,000$ but is much more efficient and will provide a cash flow of $$10,000$ a year for four years. The discount rate is $15\%.$

Answer the following questions to decide whether you should replace the machine now or wait.

a$)$What is the equivalent annual cost $($EAC$)$ of 'only the initial investment' of the new machine?

b$)$What is the EAC of the initial investment AND the cash inflow $($pay attention to the signs$)?$

c$)$Given the results above, should we wait or replace the machine now? Enter $$Wait$\text{'}$ or $$Replace$\text{'}$