Question

CALCULATING EAC: You are evaluating two different milling machines to replace your current aging machine. Machine

A costs $270000, has a three-year life, and has pretax operating costs of $61451 per year. Machine B costs $375000, has a five-year life, and has pretax operating costs of $34096 per year. For both milling machines, use straight-line depreciation to zero over the project’s life and assume a salvage value of $37341. Your tax rate is 34 % and your discount rate is 10 %.

What is the EAC for Machine A? (Round answer to 2 decimal places, round intermediate calculations to 5 decimal places)

What is the EAC for Machine B? (Round answer to 2 decimal places, round intermediate calculations to 5 decimal places)

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