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Use the following information to answer the next 3 questions. You are evaluating two different silicon...

Use the following information to answer the next 3 questions.

You are evaluating two different silicon wafer milling machines.

The Techron I costs $270,000, has a 3-year life, and has pretax operating costs of $73,000 per year.

The Techron II costs $470,000, has a 5-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 at the end of their respective lives. If your tax rate is 24 percent and your discount rate is 10 percent, compute the EAC for both machines.

1) What is the EAC of the Techron I?

2) What is the EAC of the Techron II?

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Answer #1

Techron Calculation Techron 11 Calculation Year pv @10% Year pv @ 10% 1 cash flows -$270,000.00 -$33,880.00 -$33,880.00 $4,12

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