Question: You are evaluating two different machines. The Machine I cost $195,000, has a three-year life, and has pretax operating costs of $32,000 per year. The

You are evaluating two different machines. The Machine I cost $195,000, has a three-year life, and has pretax operating costs of $32,000 per year. The Machine II costs $295,000, has a five-year life, and has pretax operating costs of $19,000 per year. For both machines, use straight-line depreciation to zero over the projects life and assume a salvage value of $20,000. If your tax rate is 35 percent and your discount rate is 14 percent, compute the EAC for both machines. Which do you prefer? Why?

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