New canning machine to assist in production of canned beans

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Reference no: EM131609823

A food manufacturer, Jaguar Foods is considering the purchase of a new canning machine to assist in the production of canned beans. The machine costs $701,200. It has an expected life of 11 years at which time its salvage value will be $71,100. The estimated operating and maintenance expenses are $11,005 per year. The book value of the machine can be determined using straight line depreciation over the 10 years. The market value each year is always 75% of the previous years market value. Assuming a tax rate of 12% and an interest rate of 17%, determine the marginal cost of the first 3 years of operating the machine. What replacement analysis method would be used if a the minimum EUAC of a challenger was known?

Reference no: EM131609823

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