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Show all steps and equations. 2) You are evaluating two different aluminum milling machines. The Alumina I...

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Finance

Show all steps and equations.

2) You are evaluating two different aluminum milling machines.The Alumina I costs $240,000, has a three-year life, and has pretaxoperating costs of $63,000 per year. The Alumina II costs $420,000,has a five-year life, and has pretax operating costs of $36,000 peryear. For both milling machines, use straight-line depreciation tozero over the project's life and assume a salvage value of $40,000.If your tax rate is 35 percent and your discount rate is 10percent, which do you prefer? Why?

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3.9 Ratings (447 Votes)
Alumina I Cost of Machine 240000 Useful Life 3 years Annual Depreciation Cost of Machine Useful Life Annual Depreciation 240000 3 Annual Depreciation 80000 Annual OCF Pretax Operating Costs 1 tax tax Depreciation    See Answer
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