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6) (35 points) Yoda Industries is considering the following two alternatives for its redesigned production operation. MARR is 10% per year compounded annually. The existing
6) (35 points) Yoda Industries is considering the following two alternatives for its redesigned production operation. MARR is 10% per year compounded annually. The existing machine is expected to have a salvage value of $20,000 at the end of its useful life of 5 years. O&M costs have been $70,000/yr. Currently the machine has a market value of $100,000. Alternative 1 (New high-capacity machine) Sell the existing machine at its market value and purchase a new high-capacity machine. This new machine will cost $320,000 and is expected to have a salvage value of $50,000 at the end of 5 years. Its annual O&M costs are expected to be $80,000. Alternative 2 (Existing machine + new low-capacity machine) Keep the existing machine and buy a new low-capacity machine in order to increase production capacity. This low-capacity machine will cost $150,000, have a salvage value of $20,000 in 5 years, and annual O&M costs are expected to be $30,000. a) (15 points) Compute the EUAC of Alternative 1 for a planning horizon of 5 years. b) (15 points) Compute the EUAC of Alternative 2 for a planning horizon of 5 years. c) (5 points) Based on an annual cost comparison, what is your recommendation
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