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15 years ago, the National Hockey League purchased a video replay machine for $100,000. Due to it’s extreme age, the operations and maintenance costs for the next year is $3,500 increasing at 25% per year for six more years. Due to nostalgia amongst hockey fans, the machine could fetch $20,000 at auction; a price which is expected to increase at a rate of 10% annually. The minimum EUAC of a new video replay device is $8,000. When, if ever, should the N.H.L. replace the video system if the real MARR is 12% and inflation is 7%?

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Financial Management, Finance

Category:- Financial Management
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