1. You are evaluating two different silicon wafer milling machines. The Techron I costs $215,000, has a three-year life, and has pretax operating costs of $35,000 per year. The Techron II costs $270,000, has a five-year life, and has pretax operating costs of $44,000 per year. For both milling machines, use straight-line depreciation to zero over the projects life and assume a salvage value of $20,000. If your tax rate is 35 percent and your discount rate is 12 percent, compute the EAC for both machines.

Which do you prefer? Why? (Assume that each machine will be replaced (forever)

with a new one in the last year of its life.)