You are evaluating two different silicon wafer milling machines. The Techron I costs $225,000, has a three-year life, and has pretax operating costs of $58,000 per year. The Techron II costs $395,000, has a five-year life, and has pretax operating costs of $31,000 per year. For both milling machines, use straight-line depreciation to zero over the project's life and assume a salvage value of $35,000. If your tax rate is 25 percent and your discount rate is 10 percent, compute the EAC for both machines. (Your answer should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
You are evaluating two different silicon wafer milling machines. The Techron I costs $225,000, has a three-year life, and has pretax operating costs of $58,000 per year. The Techron II costs $395,000, has a five-year life, and has pretax operating costs of $31,000 per year. For both milling machines, use straight-line depreciation to zero over the project's life and assume a salvage value of $35,000. If your tax rate is 25 percent and your discount rate is 10 percent, compute the EAC for both machines. (Your answer should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
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
Section: Chapter Questions
Problem 1PS
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How do you find the EAC for both machines?
Transcribed Image Text:You are evaluating two different silicon wafer milling machines. The Techron I costs
$225,000, has a three-year life, and has pretax operating costs of $58,000 per year. The
Techron Il costs $395,000, has a five-year life, and has pretax operating costs of $31,000
per year. For both milling machines, use straight-line depreciation to zero over the
project's life and assume a salvage value of $35,000. If your tax rate is 25 percent and
your discount rate is 10 percent, compute the EAC for both machines. (Your answer
should be a negative value and indicated by a minus sign. Do not round intermediate
calculations and round your answers to 2 decimal places, e.g., 32.16.)
Techron I
Techron II
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