12-11) The company is considering two plans, A and B, and is interested in choosing the most economical plan. Plan A consists of two machines, I and II. The following information is available: Plan B Plan A Machine I Machine II Initial cost 400000 50000 250000 Scrap value Annual Financial Process (CFBT) Annual financial process Annual financial process 50000 10000 150000 5000 100000 200000 5000 100000 250000 5000 50000 Useful life 12 6 12 Depreciation method is the sum of years figures with a tax rate of 50%. Determine the most economical way if the minimum absorption rate is assumed to be 20%.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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12-11) The company is considering two plans, A and B, and is interested in
choosing the most economical plan. Plan A consists of two machines, I and II. The
following information is available:
Plan B
Plan A
Machine I
Machine II
Initial cost
400000
50000
250000
Scrap value
Annual Financial Process (CFBT)
Annual financial process
Annual financial process
50000
10000
150000
5000
100000
200000
5000
100000
250000
5000
50000
Useful life
12
12
Depreciation method is the sum of years figures with a tax rate of 50%.
Determine the most economical way if the minimum absorption rate is assumed
to be 20%.
Transcribed Image Text:12-11) The company is considering two plans, A and B, and is interested in choosing the most economical plan. Plan A consists of two machines, I and II. The following information is available: Plan B Plan A Machine I Machine II Initial cost 400000 50000 250000 Scrap value Annual Financial Process (CFBT) Annual financial process Annual financial process 50000 10000 150000 5000 100000 200000 5000 100000 250000 5000 50000 Useful life 12 12 Depreciation method is the sum of years figures with a tax rate of 50%. Determine the most economical way if the minimum absorption rate is assumed to be 20%.
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