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The Sandwich Co., whose earnings put it in the 46% combined state and federal tax bracket, is consider- ing purchasing a piece of food-handling equipment

The Sandwich Co., whose earnings put it in the 46% combined state and federal tax bracket, is consider- ing purchasing a piece of food-handling equipment for $25,000. The equipment has a useful life of 4 years and a salvage value of $5000. The resale value of the equipment will be $6550. The new equipment is expected to increase the companys earnings by

$8000 in each of the 4 years. The MARR for Sand- wich is 10%. Determine the EAW using (a) straight- line depreciation and (b) MACRS depreciation.

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