Calculate the annual equivalent cost of capital of machine

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Question - You have purchased a machine costing $20,000. The machine will be used for 2 years, and at the end of the second year, the salvage value of the machine is expected to be $10,000. The expected annual net savings generated by the machine will be $30,000 during the first year and $40,000 during the second year. The machine will be used 6,000 hours during the first year and 8,000 hours during the second year. The interest rate is 10%.

Required -

a) Calculate the annual equivalent cost of capital of the machine.

b) Calculate the annual equivalent of savings.

c) Calculate the annual equivalent net savings per machine hour.

Reference no: EM133170866

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