You are evaluating two different silicon wafer milling machines. The Techron I costs $ 290,000, has a 3 year life, and has pretax operating costs of $ 67,000 per year. The Techron II costs $ 510,000, has a 5 year life, and has pretax operating costs of $ 35,000 per year. For both milling machines, use straight-line depreciation to zero over the project's life and assume a salvage value of $ 40,000. If your tax rate is 35 % and your discount rate is 10 %, compute the EAC for both machines. Which do you prefer?
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