compute the EAC for both machines

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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You are evaluating two different silicon wafer milling machines. The Techron I costs $270,000, has a three-year life, and has pretax operating costs of $73,000 per year. The Techron II costs $470,000, has a five-year life, and has pretax operating costs of $46,000 per year. For both milling machines, use straight-line depreciation to zero over the project’s life and assume a salvage value of $50,000. 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 answers to 2 decimal places, e.g., 32.16.)

 

  EAC
  Techron I $   
  Techron II $   
 

 

Which machine do you prefer?
 
  • Techron II
  • Techron I
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