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Problem:

You are evaluating two different silicon wafer milling machines. The Techron I costs $216,000, has a three-year life, and has pretax operating costs of $55,000 per year. The Techron II costs $380,000, has a five-year life, and has pretax operating costs of $28,000 per year. For both milling machines, use straight-line depreciation to zero over the project's life and assume a salvage value of $32,000.

Required:

Question: If your tax rate is 35 percent and your discount rate is 10 percent, compute the EAC for both machines.

Note: Show supporting computations in good form.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91167336

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