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Novelis, a subsidiary of Alcan, produces aluminium foil for household use. Their plant in Toronto purchased a set of working rollers, for thinning the processed

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Novelis, a subsidiary of Alcan, produces aluminium foil for household use. Their plant in Toronto purchased a set of working rollers, for thinning the processed aluminium, 12 years ago for $5 million dollars. The Operations Project Manager has decided to conduct an analysis to determine when the equipment should be replaced. The Project Manager has predicted the O&M costs for the next 5 years. Novelis uses a MARR of 12% for operations projects and estimates the Operating and Maintenance costs to be $225,000 in year 1, increasing by $ 27,000/year for the remainder of the study. a) Assuming a declining-balance depreciation model and a depreciation rate of 10%, calculate the salvage value of the working rollers for each year, 0 to 5, of the study period. Find the economic life and minimum EAC for the existing working rollers. b) Note: Use all four decimal places in the interest factor, not five, not six, not three, but four decimal places

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