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A manufacturer is deciding if they should automate part of the production process. The new equipment will cost $125,000, and the automation will save $34,000

A manufacturer is deciding if they should automate part of the production process. The new equipment will cost $125,000, and the automation will save $34,000 per year (before taxes). Assume the equipment has a 4-year life and will be depreciated to zero on a straight-line basis over those years. If the tax rate is 25% and the discount rate is 12%, should the manufacturer automate?

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