Final answer:
To calculate the annual equivalent cost of capital for the machine, one must discount the annual savings back to their present value and average the net cost of the machine over two years. This calculation does not directly use the provided labor and machine costs, nor the bond examples, and is focused on the cash flows related to the machine's operation.
Step-by-step explanation:
The main answer involves calculating the annual equivalent cost of capital for a machine over two years, considering the salvage value, annual savings, operational hours, and a given interest rate. To determine the annual equivalent cost, we need to account for the net cost of the machine, which is its cost minus the salvage value, and the annual savings it generates discounted to their present value considering the 10% interest rate.To calculate the annual equivalent costs, we can use the formula for present value of an annuity since we have cash flows in the form of savings for two years. However, the question provided does not directly relate to the information given about labor and machine costs or bond calculations provided for reference. The information seems to be extraneous to calculating the annual equivalent cost and may not be needed for this specific calculation.The present value of the annual savings can be calculated as follows Year 1 savings of $30,000 discounted back by one year at 10%.Year 2 savings of $40,000 discounted back by two years at 10%.The machine's cost, less salvage value, must be spread evenly over the two years to get the annual cost of capital. This annual cost of capital is then compared to the present value of the savings to determine if the investment is profitable.