A spooling machine used in the production of rolls of consumer paper is initially purchased at a cost ( $ 17,500 ). The market value drops by ( $ 2,000 ) in years 1 through 4 and increases by ( $ 5,000 ) in years 5 and 6 due to the high demand for paper goods during the coronavirus pandemic. The machine is depreciated using straight line solutionspile.com

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A spooling machine used in the production of rolls of consumer paper is initially purchased at a cost  (  $ 17,500  ). The market value drops by  (  $ 2,000  ) in years 1 through 4 and increases by  (  $ 5,000  ) in years 5 and 6 due to the high demand for paper goods during the coronavirus pandemic. The machine is depreciated using straight line depreciation over 5 years to a salvage value of  (  $ 0  ). The operations and maintenance costs of the machine are  (  $ 2,000  ) in year 1 and increase by  (  $ 500  ) per year. Assume an after-tax interest rate of  ( 5  %  ) and a flat tax rate of  ( 21  %  ). Determine: a) The after-tax marginal costs for each year. b) When the machine should be replaced if a new machine has a minimum after-tax EUAC of  (  $ 4,500  ). solutionspile.com

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