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A1 Technologies currently has a lab analyzer worth $2500 today and will lose $1000 in value by next year plus $500 per year thereafter. Its
A1 Technologies currently has a lab analyzer worth $2500 today and will lose $1000 in value by next year plus $500 per year thereafter. Its $8000 operating cost for this year is predicted to increase by $1000 per year, owing to deterioration. It will be retired in 4 years, when its salvage value will be zero. A new improved lab analyzer that satisfactorily performs the same function as the existing machine can be purchased for $16,000 and is expected to have constant annual operating cost of $6,000 to the end of its 7 years economic life at which time its salvage value will be $l, 500. No major improvement is expected for machine of this type within 7 years. The interest rate is 12% per year. a) The president of A1 Technologies has asked your option of whether the existing machine be replaced and why? b) What is the most economic life of the existing machine
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