Hi all,

Can someone please answer this question with all steps! Thankyou!

As a result ofimprovements in product engineering, United Automation is able tosell one of its two milling machines. Both machines perform thesame function but differ in age. The newer machine could be soldtoday for $69,500. Its operating costs are $22,600 a year, but infive years the machine will require a $18,700 overhaul. Thereafteroperating costs will be $31,300 until the machine is finally soldin year 10 for $6,950.

The older machinecould be sold today for $26,300. If it is kept, it will need animmediate $26,500 overhaul. Thereafter operating costs will be$34,900 a year until the machine is finally sold in year 5 for$6,950.   

Both machines arefully depreciated for tax purposes. The company pays tax at 35%.Cash flows have been forecasted in real terms. The real cost ofcapital is 13%.

a.Calculate the equivalent annual costs for selling the new machineand for selling the old machine. (Do not round intermediatecalculations. Enter your answers as a positive value rounded to 2decimal places.)

	Equivalent Annual Cost
Sell new machine	$
Sell old machine	$

b.Which machine should United Automation sell?

     

	Sell newmachine
	Sell oldmachine

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