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Please answer all parts and show all work 3. A spooling machine used in the production of rolls of consumer paper is initially purchased at
Please answer all parts and show all work
3. A spooling machine used in the production of rolls of consumer paper is initially purchased at a cost of $17,500. The market value drops by $2,000 in years 1 through 4 and increases by $5,000 in years 5 and 6 due to the high demand for paper goods during the coronavirus pandemic. The machine is depreciated using straight line depreciation over 5 years to a salvage value of $0. The operations and maintenance costs of the machine are $2,000 in year 1 and increase by $500 per year. Assume an after-tax interest rate of 5% and a flat tax rate of 21%. Determine: a. The after-tax marginal costs for each year (1-6) b. When the machine should be replaced if a new machine has a minimum after-tax EUAC of $4,500. 3. A spooling machine used in the production of rolls of consumer paper is initially purchased at a cost of $17,500. The market value drops by $2,000 in years 1 through 4 and increases by $5,000 in years 5 and 6 due to the high demand for paper goods during the coronavirus pandemic. The machine is depreciated using straight line depreciation over 5 years to a salvage value of $0. The operations and maintenance costs of the machine are $2,000 in year 1 and increase by $500 per year. Assume an after-tax interest rate of 5% and a flat tax rate of 21%. Determine: a. The after-tax marginal costs for each year (1-6) b. When the machine should be replaced if a new machine has a minimum after-tax EUAC of $4,500Step by Step Solution
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