Question 1 ( 4 marks ) You are evaluating two different pollution control devices : ( a) A filtration system which costs $1 . 1 million to install and $60 ,000 annually to operate . It would have to be replaced every five years . (6) A precipitation system which costs $1 . 9 million to install , but only $10 ,000 per year to operate . The precipitation equipment has an operating life of eight years . The company rents its factory and both systems are considered leasehold improvements so straight-line capital cost allowance is used throughout , and neither system has any salvage* value . Which system should the company select if the cost of capital is 12% and the tax rate is 40% ? Ignore the half - year rule . We calculated the EAC for the filtration system in class . For your assignment , calculate the EAC for the precipitation system . ( 3 marks )