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.
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
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3abc. Help me answer the given question. Do not round off answers while solving, instead just the final answer will be rounded off to two decimal places.
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:
System
First Cost, $
CFBT, $ per year
Life, Years
A
Add your answer
-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.
The annual worth for system A, (in $)
Round to the nearest two (2) decimal places
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