(10 marks) A family operated dairy farm needs to purchase and install a filing-machine for their creamer production-line. They have two alternatives: Purchase a used machine: First cost = $29,165; service life = 6 years; maintenance costs of $10,000 each year; and a salvage value of $0. Purchase a new machine: First cost = $80,000; service life = 6 years; maintenance costs of $0 each year; and salvage value = $15,000. The installation of either machine will generate additional revenues of $17,500 per year. The family uses a MARR of 10%. a) Find the IRR for the purchase of the used machine. (4 marks) b) Use ‘Incremental IRR’ to determine which machine is preferred? (6 marks)

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