Question: You are evaluating two different milling machines. The Techron I costs 210,000, has a three year life, and pretax operating costs of 34,000 per year.

You are evaluating two different milling machines. The Techron I costs 210,000, has a three year life, and pretax operating costs of 34,000 per year. The Techron II costs 320,000, lasts five years, and has pretax operating costs of 23,000 per year. Assume both machines can be depreciated using the straight-line method and both machines will have a salvage value of 20,000. The company tax rate is 35% and the discount rate is 12%. Which machine should you purchase?

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