You are evaluating two different air cleaners.

The Techon I costs $400,000, has a five-year life, and has pretax operating costs of $30,000 per year. The Techon II costs $520,000, has a six-year life, and has pretax operating costs of $26,000 per year. For both cleaners, use straight line depreciation to a book value of $100,000 over the project's life. Assume the market salvage value for both cleaners is zero. Your tax rate is 20 percent and your discount rate is 10 percent.

a) Compute the EAC for both cleaners. (16 points)

b) Which cleaner do you prefer? Why? (4 points)