Evaluating two different lasagna producing machines

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Reference no: EM131609838

Garfield is evaluating two different lasagna producing machines. The LASAG I costs USD 310,000, has a fouryear life, and has pre-tax operating costs of USD 67,000 per year. The LASAG II costs USD 510,000, has a fiveyear life, and has pre-tax operating costs of USD 38,000 per year. For both machines, use straight-line depreciation to zero over the project’s life and assume a salvage value of USD 40,000 for LASAG I and USD 100,000 for LASAG II. If Garfield’s tax rate is 40.00 percent and his discount rate is 12.50 percent. Which machine would Garfield prefer?

Reference no: EM131609838

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