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Business, 30.04.2021 18:00 jojojolie6505

A machine purchased 4 year ago cost 80,000 can be used for only two more years. The operating cost is 71,000 per year. Company B can purchase a replacement with cost of 210,000 and annual operation cost of 48,000. This new equipment will have 10-year life time with salvage value of 60,000 at the end of year 10. At the interest rate of 12% per year compounded quarterly, what minimum replacement value would render the challenger attractive.

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