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) Now assume that prime cost (reflecting the respective lives of the asset) is used for servers for tax depreciation purposes. The relevant tax rate

) Now assume that prime cost (reflecting the respective lives of the asset) is used for servers for tax depreciation purposes. The relevant tax rate is 30 per cent and tax is paid in the year of income. Assume that salvage value for both systems is $10,000. The relevant discount rate however drops to 5.6 per cent [8%*(1-30%)]. Compute the AEC for both servers. Which is preferred now?

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