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 $207,000, has a 3-year life, and has pretax operating costs of $39,000 per year. The Techron II costs $326,000, has a 6-year life, and has pretax operating costs of $26,000 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 32 percent and your discount rate is 8 percent. The Techron I has an EAC of $_______ , while the Techron II has an EAC of $__________ .
(Do not include the dollar signs ($). Negative amounts should be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

Techron I EAC = 207,000(A/P, 8%, 3) + 39,000*(1-32%) - 20,000(A/F, 8%, 3) ie EAC I = 207000*0.3880 + 26520 - 20000*0.3080 = $100,676.00 Techron II EAC = 326,000(A/P, 8%, 6) + 26,000*(1-32%) - 20,000(A/F, 8%, 6) ie EAC II = 326000*0.2163 + 17680 - 20000*0.1363 = $85,467.8

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