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1. Your company must replace an old machine. There are two offers: Purchase price Variable unit cost Fixed cost/yr Life span Salvage value Machine A
1. Your company must replace an old machine. There are two offers: Purchase price Variable unit cost Fixed cost/yr Life span Salvage value Machine A 450,000 0.15 100,000 8 None Machine B 250,000 0.25 75,000 4 None Company uses Straight-Line depreciation. Corporate tax rate is 40%. Cost of capital at the company is 7% (a) For y = 10%, express the cost of machine A and B as functions of the annual production quantity (b) For 10%, what is the break-even value for Q such that the company should still acquire the machine B? (c) Replacement analysis in this setting makes what critical assumptions
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