You are evaluating two different silicon wafer milling machines. The Techron I c

Question

You are evaluating two different silicon wafer milling machines. The Techron I costs $193,000, has a 4-year life, and has pretax operating costs of $35,000 per year. The Techron II costs $294,000, has a 6-year life, and has pretax operating costs of $23,000 per year. For both milling machines, use straight-line depreciation to zero over the project's life and assume a salvage value of $20,000. If your tax rate is 34 percent and your discount rate is 9 percent. The Techron I has an EAC of $__________, while the Techron II has an EAC of $___________. You prefer Techron II.

Explanation / Answer

, you prefer the Techron Il because it has the lower (less negative) annual cost.

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