A granary has two options for a conveyor used in the manufacture of grain for transporting, filling, or emptying. One conveyor can be purchased and installed for $90,000 with $4,500 salvage value after 16 years. The other can be purchased and installed for $110,000 with $2.000 salvage value after 16 years. Operation and maintenance for each is expected to be $21.500 and $12,000 per year, respectively. The granary uses MACRS-GDS depreciation, has a marginal tax rate of 40%, and has a MARR of 5% after taxes.
A granary has two options for a conveyor used in the manufacture of grain for transporting, filling, or emptying. One conveyor can be purchased and installed for $90,000 with $4,500 salvage value after 16 years. The other can be purchased and installed for $110,000 with $2.000 salvage value after 16 years. Operation and maintenance for each is expected to be $21.500 and $12,000 per year, respectively. The granary uses MACRS-GDS depreciation, has a marginal tax rate of 40%, and has a MARR of 5% after taxes.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:A granary has two options for a conveyor used in the manufacture of grain for transporting, filling, or
emptying. One conveyor can be purchased and installed for $90,000 with $4,500 salvage value after 16
years. The other can be purchased and installed for $110,000 with $2,000 salvage value after 16 years.
Operation and maintenance for each is expected to be $21,500 and $12,000 per year, respectively. The
granary uses MACRS-GDS depreciation, has a marginal tax rate of 40%, and has a MARR of 5% after taxes.
Transcribed Image Text:Determine which alternative is less costly, based upon comparison of after-tax annual worth.
Alternative 2 v
Show the AW values used to make your decision:
Conveyor 1: $
Conveyor 2: $
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