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A piece of equipment for a candy factory is purchase for $20,000. The machine each year is 90% of the market value in the previous year. It is also expected that the operations and maintenance cost of the machine will be $20,000 annually. Using MACRS depreciation, an interest rate of 7% and a tax rate of 35%, determine the marginal costs of the machine in the first 2 years use. Without performing further calculations what technique would be needed to perform a replacement analysis?

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