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: System First Cost, $ CFBT, $ per year Life, Years A -120,000 60,000 3 B -75,000 20,000 5 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 8% 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.

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: System First Cost, $ CFBT, $ per year Life, Years A -120,000 60,000 3 B -75,000 20,000 5 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 8% 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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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