Problem
You are evaluating two different milling machines to replace your current aging machine. Machine A costs $278,630, has a three-year life, and has pretax operating costs of $69,631 per year. Machine B costs $399,214, has a five-year life, and has pretax operating costs of $32,397 per year. For both milling machines, use straight-line depreciation to zero over the project's life and assume a salvage value of $37,101. Your tax rate is 34 % and your discount rate is 10 %.
What is the EAC for Machine A?