Question
You are evaluating two different silicon wafer milling machine. The Techron I costs $270,000 (initial investment), has a 3-year life, and has pretax operating costs
You are evaluating two different silicon wafer milling machine.
The Techron I costs $270,000 (initial investment), has a 3-year life, and has pretax operating costs of $69,000 per year.
The Techron II costs $475,000(initial investment), has a 5-year life, and has pretax operating costs of $36,000 per year.
For both milling machines, use straight-line depreciation to zero over the projects life and assume no salvage value for Techron I and II.
The tax rate is 35%, and the discount rate is $10%.
- What is the amount of annual depreciation expenses for each machine?
- Techron I
- Techron II
- Compute the annual OCF from each machine.
- Techron I
- Techron II
- Compute the NPV of each machine.
- Techron I
- Techron II
- Compute EAC for each machine.
- Techron I
- Techron II
- Which do you prefer? Why?
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Financial Accounting
Authors: J. David Spiceland, Wayne Thomas, Don Herrmann
3rd edition
978-0078025549
