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The AB Company is faced with two proposed methods for making one of their products. Method A involves the purchase of a machine for $8,000.
The AB Company is faced with two proposed methods for making one of their products. Method A involves the purchase of a machine for $8,000. It will also have a seven year life, with $3,000 salvage value at that time. Using method A involves additional costof $0.55 per unit of product produced per year. Method B involves the purchase of a machine for $5,000. It will have a $2,500 salvage value when disposed of in seven years. Additional cost of $0.40 per unit of product per year arises when method B is used. At 12% interest rate is used by the AB Company in evaluating investment alternatives. For what range of annual production volume values is each method preferred? Show Graphical Representation of alternatives and values of each range
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