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HL Precision Work invests $1.2M to acquire a new milling machine, which will be fully depreciated according to the straight line depreciation method over its

HL Precision Work invests $1.2M to acquire a new milling machine, which will be fully

depreciated according to the straight line depreciation method over its 3-year life, after which time it will be worthless. The machine has pretax operating costs of $260,000 per year. The average and marginal tax rates are, respectively, 33% and 35%. Besides, there is an initial $80,000 NWC requirement that will be fully recoverable. Compute the equivalent annual cost (EAC) of this machine with a discount rate of 14%.

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