You are evaluating two different silicon wafer milling machines. The Techron I costs $249,000, has a 3-year life, and has pretax operating costs of $66,000 per year. The Techron II costs $435,000, has a 5-year life, and has pretax operating costs of $39,000 per year. For both milling machines, use straight-line depreciation to zero over the project's life and assume a salvage value of $43,000. If your tax rate is 22 percent and your discount rate is 11 percent, compute the EAC for both machines. (A negative answer should be 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 Which machine do you prefer? O Techron II O Techron I

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
$249,000, has a 3-year life, and has pretax operating costs of $66,000 per year. The
Techron II costs $435,000, has a 5-year life, and has pretax operating costs of $39,000
per year. For both milling machines, use straight-line depreciation to zero over the
project's life and assume a salvage value of $43,000. If your tax rate is 22 percent and
your discount rate is 11 percent, compute the EAC for both machines. (A negative
answer should be 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
Which machine do you prefer?
O Techron II
O Techron I
Transcribed Image Text:You are evaluating two different silicon wafer milling machines. The Techron I costs $249,000, has a 3-year life, and has pretax operating costs of $66,000 per year. The Techron II costs $435,000, has a 5-year life, and has pretax operating costs of $39,000 per year. For both milling machines, use straight-line depreciation to zero over the project's life and assume a salvage value of $43,000. If your tax rate is 22 percent and your discount rate is 11 percent, compute the EAC for both machines. (A negative answer should be 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 Which machine do you prefer? O Techron II O Techron I
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