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you are evaluating two different silicon wafer milling machines. The Techron I costs $245,000, has a...

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Finance

you are evaluating two different silicon wafer millingmachines. The Techron I costs $245,000, has a three- year life anda pretax operating costs of $63,000 per year. The Techron II cosr$420,000, has a five year life, and has pretax operating costs of$35,000 per year. For both milling machines, use straight linedepreciation to zero over the project's life and assume a salvagevalue of $40,000. If your tax rate is 22 percent and your discountrate is 10 percent, compute the EAC for both machines.

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3.8 Ratings (714 Votes)
The Aftertax salvage Value Aftertax salvage value 31200 40000 x 1 022 Equivalent Annual Cost EAC for Techron I Operating Cash Flow OCF Pretax Savings1 Tax Rate Depreciation x Tax Rate 630001 022 245000 3 Years x 022 49140 1796667 3117333 Net Present Value Period Annual Cash Flow Present Value factor at 10 Present Value of Cash Flow 1    See Answer
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Transcribed Image Text

you are evaluating two different silicon wafer millingmachines. The Techron I costs $245,000, has a three- year life anda pretax operating costs of $63,000 per year. The Techron II cosr$420,000, has a five year life, and has pretax operating costs of$35,000 per year. For both milling machines, use straight linedepreciation to zero over the project's life and assume a salvagevalue of $40,000. If your tax rate is 22 percent and your discountrate is 10 percent, compute the EAC for both machines.

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