This extended example illustrates what happens to the EAC when we consider taxes. You are evaluating two different pollution control options. A filtration system will cost $1.1 million to install and $100 000 annually, before taxes, to operate. It will have to be completely replaced every five years. A precipitation system will cost $1.9 million to install but only $10 000 per year to operate. The precipitation equipment has an effective operating life of eight years. Straight-line depreciation is used throughout, and neither system has any salvage value. Which option should we select if we use a 12 per cent discount rate? The tax rate is 30 per cent