"Discount rate is 15% "

Question Two (of 2) (35 points) Lotto Gelato Corporation is investigating possible replacements for its gelato machine. One possibility is the Super-Italomatic that costs $500,000 to acquire. Operating and maintenance (O&M) costs for this machine and its expected residual values, all after taxes, are: End of Year O&M Costs $50,000 60,000 75,000 90,000 Residual Value $420,000 380,000 335,000 300,000 200,000 125,000 120,000 150,000 Lotto Gelato uses a 15% minimum acceptable rate of return to evaluate investment alternatives. Required: (Show your work for partial credit) a. Determine the Equivalent Uniform Cost (EUC) if Lotto Gelato acquires the machine, uses it and then sells it after: i. One Year ii. Two Years 111. Three Years iv. Four Years V. Five Years vi. Six Years b. What is the economic life of this machine? Why did you choose this