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In: Accounting

Info given: Interest is expected to be 10% per year unless stated otherwise. Effective tax rate...

Info given: Interest is expected to be 10% per year unless stated otherwise. Effective tax rate is 38% (Not necessary needed).

Hugo wants to purchase a Diamond Cutting Diamond Cutter, which costs $40,000 to purchase and $10,000 per year to operate. The operating costs increase by 10% per year every year after year 1. The machine has no salvage value, and a 20-year life.

A) What is the equivalent uniform annual cost of the Diamond Cutting Diamond Cutter machine over its entire life?

B) If the purchase price of the Diamond Cutting Diamond Cutter remains the same, when should a new one be purchased? If you should wait until the end of its life then enter 20. Otherwise enter the year when a new one should be bought.

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Expert Solution

ekkarill92 answered 2 years ago
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