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Economic Evaluation of Machine A

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Machine A costs $20,000 , has a zero salvage value at any time, and has an associated labor cost pf $1.14 for each piece produced on it. Machine B costs $36,000 , has zero salvage value at any time , and has an associated labor cost of $0.85.Neither machine can be used except to produce the product described.If the interest rate is 10% and the annual rate of production is 20,000 unit, how many years will it take for the two machines cost to break even?

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Solution Summary

The solution gives an economic evaluation of a machine to salvage time in production.

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At Break even point the total cost with machine A and B is same.
Suppose the break even point is x years, then the total present value cost of machine A ...

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