## Wednesday, 9 July 2014

### You are evaluating two different silicon wafer milling machines. The Techron I costs \$222,000, has a three-year life, and has pretax operating costs of \$57,000 per year. The Techron II costs \$390,000, has a five-year life, and has pretax operating costs of \$30,000 per year. For both milling machines, use straight-line depreciation to zero over the project’s life and assume a salvage value of \$34,000. If your tax rate is 35 percent and your discount rate is 9 percent, compute the EAC for both machines.

You are evaluating two different silicon wafer milling machines. The Techron I costs \$222,000, has a three-year life, and has pretax operating costs of \$57,000 per year. The Techron II costs \$390,000, has a five-year life, and has pretax operating costs of \$30,000 per year. For both milling machines, use straight-line depreciation to zero over the project’s life and assume a salvage value of \$34,000. If your tax rate is 35 percent and your discount rate is 9 percent, compute the EAC for both machines. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

 EAC Techron I \$ Techron II \$

 Which do you prefer? Techron II

Explanation: