16. 19.

Calculating EAC [LO 10.4] You are evaluating two different silicon wafer milling machines. The Techron I costs $245 000, has a threeyear life and has pretax operating costs of $63 000 per year. The Techron II costs $420 000, has a five-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 30 per cent and your discount rate is 10 per cent, compute the EAC for both machines. Which do you prefer?

Why?