A European candy manufacturing plant manager must select a new irradiation system to ensure the safety of specific ingredients, while being economical. The two alternatives available have the following estimates: A B System First Cost, $ -145,000 -85,000 CFBT, $ per Year 60,000 20,000 5 Life, Years 3 The company is in the 35% tax bracket and assumes classical straight line depreciation for alternative comparisons performed at an after-tax minimum acceptable rate of return (MARR) of 5% per year. A salvage value of zero is used when depreciation is calculated; however, system B can be sold after 5 years for an estimated 10% of its first cost. System A has no anticipated salvage value. Determine which is more economical using an annual worth (AW) analysis worked by hand. The annual worth analysis for system A is determined to be $ The annual worth analysis for system Bis determined to be $ System A is selected.
A European candy manufacturing plant manager must select a new irradiation system to ensure the safety of specific ingredients, while being economical. The two alternatives available have the following estimates: A B System First Cost, $ -145,000 -85,000 CFBT, $ per Year 60,000 20,000 5 Life, Years 3 The company is in the 35% tax bracket and assumes classical straight line depreciation for alternative comparisons performed at an after-tax minimum acceptable rate of return (MARR) of 5% per year. A salvage value of zero is used when depreciation is calculated; however, system B can be sold after 5 years for an estimated 10% of its first cost. System A has no anticipated salvage value. Determine which is more economical using an annual worth (AW) analysis worked by hand. The annual worth analysis for system A is determined to be $ The annual worth analysis for system Bis determined to be $ System A is selected.
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
Section: Chapter Questions
Problem 1PS
Related questions
Question
10
Transcribed Image Text:A European candy manufacturing plant manager must select a new irradiation system to ensure the safety of specific
ingredients, while being economical. The two alternatives available have the following estimates:
A
B
System
First Cost, $
-145,000
-85,000
CFBT, $ per Year
60,000
20,000
5
Life, Years
3
The company is in the 35% tax bracket and assumes classical straight line depreciation for alternative comparisons
performed at an after-tax minimum acceptable rate of return (MARR) of 5% per year. A salvage value of zero is used when
depreciation is calculated; however, system B can be sold after 5 years for an estimated 10% of its first cost. System A has no
anticipated salvage value. Determine which is more economical using an annual worth (AW) analysis worked by hand.
The annual worth analysis for system A is determined to be $
The annual worth analysis for system Bis determined to be $
System A
✓is selected.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education