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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
A machine produces 1000 units of product per day in an existing manufacturing operation. The machine has become obsolete due to tightened product quality standards. Replacement machine Ac€A?BAc€?? will cost $25,000 and can produce up to 1500 units of product per day for the next 3 years with annual escalated dollar operating costs of $7,000 in each the years 1, 2, and 3 for either 1000 or 1500 units per day, with a $3,500 escalated dollar salvage value at the end of year 3.Depreciate the machine using 5-year life MACRS depreciation starting in year 0 with the half-year convention. Assume that other taxable income exists that will permit using all tax deductions in the year incurred. For an effective income tax rate of 40%, what is the present worth cost of the replacement machine "B"? Assuming 250 working days per year, for a minimum escalated dollar DCFROR of 24%. (No use exists for the extra 500 units of product per day that machine Ac€A?BAc€?? can produce.)
A) 24,880
B) 19,938
C) 25,880
D) 26,880
Im just not understanding the deprciation? Help Please
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