Determine after tax marginal costs of the machine

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Reference no: EM131919709

A piece of petroleum drilling equipment is purchased for $1.5 million. The market value of the equipment decreases linearly over its 20-year useful lfe with an assumed salvage value of $200,000. It is expected that the operations and maintenance cost of the machine will be $20,000 annually, increasing by 3% each year. Using MACRS depreciation, an after-tax real MARR of 5%, an inflation rate of 3% and a tax rate of 35%, determine the after tax marginal costs of the machine in the first 2 years of use Without performing further calculations what technique would be needed to perform a replacement analysis?

Reference no: EM131919709

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