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4. You are evaluating two different silicon wafer milling machines. The Techron I costs $200,000, has three year life, and has pretax operating cost of
4. You are evaluating two different silicon wafer milling machines. The Techron I costs $200,000, has three year life, and has pretax operating cost of $45,000 per year. The Techron II costs $150,000, has a five-year life, and has pretax operating costs of $40,000 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 0% and your discount rate (required return) is 10%. a. Compute EAC (equivalent annual cost) of Techron I. b. Compute EAC (equivalent annual cost) of Techron II. c. What would be EAC of Techron I if your required return is 15%? d. What would be EAC of Techron I if the tax rate is 20% and the required return is 10%? e. What would be EAC of Techron II if the tax rate is 20% and the required return is 10%
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