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I'd suggest getting some data for the area that's in a projected coordinate system, georeference the scanned map to the data, create new line feature class in the same projection, digitize the contours, attribute the contour lines with elevation values (in the same units as the linear units of the projected coordinate system). Digitize streams and ridgelines, if available and use the Topo to Raster tool:
Here is another resource with some alternative methods.
This is great, will work on your instructions, this is really helpful, thank you for the quick response.,