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A contractor wants to determine whether he should purchase a new boring machine or a used one in old type for drilling wells in an
A contractor wants to determine whether he should purchase a new boring machine or a used one in old type for drilling wells in an area. The initial cost of the boring machine is $26,000 with a $9000 salvage value after 10 years. Fixed costs for insurance, license, etc. are expected to be $17,000 per year. The machine will require one operator at $15 per hour and maintenance purchase the old one and hire 2 workers at $10 per hour each. The old machine costs $1500 and has a useful life of 5 years with no salvage value. Its operating cost is expected to be $1.20 per hour, and with this machine, the two workers can drill 0.04 mile of depth in 1 hour. The contractor's MARR is 10% per year. Determine the number of miles of drill per year the contractor would have to service for the two options to break even
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