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Problem 2 (3 points). Machine A has an initial cost of $500,000, an estimated service period of 10 years, and an estimated salvage value of

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Problem 2 (3 points). Machine "A" has an initial cost of $500,000, an estimated service period of 10 years, and an estimated salvage value of $100,000 at the end of the 10 year. Estimated end-of-year annual disbursements for operation and maintenance are $50,000. A major overhaul costing $100,000 will be required at the end of year 5. An alternate machine "B" has an initial cost of $400,000 and an estimated zero salvage value at the end of the 10 year-service period with estimated end-of-the year disbursements for operation and maintenance of $80,000 for the first year, $85,000 for the second year and increasing $5000 each year thereafter. Using a minimum ROR of 12 %, compare the present worth costs of 10 year-service from Machines "A" and "B". Which alternative would you recommend

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