A portable concrete test instrument used in construction for evaluating and profiling concrete surfaces (MACRS-GDS 5-year property class) is under consideration by a construction firm for $22,500. The instrument will be used for 6 years and be worth $3,000 at that time. The annual cost of use and maintenance will be $9,500. Alternatively, a more automated instrument (same property class) available from the manufacturer costs $28,500, with use and maintenance costs of only $9,000 and salvage value after 6 years of $2,000. The marginal tax rate is 25%, and MARR is an after-tax 12%. Determine which alternative is less costly, based upon comparison of after-tax annual worth. Show the AW values used to make your decision: Alternative 1: $

A portable concrete test instrument used in construction for evaluating and profiling concrete surfaces (MACRS-GDS 5-year property class) is under consideration by a construction firm for $22,500. The instrument will be used for 6 years and be worth $3,000 at that time. The annual cost of use and maintenance will be $9,500. Alternatively, a more automated instrument (same property class) available from the manufacturer costs $28,500, with use and maintenance costs of only $9,000 and salvage value after 6 years of $2,000. The marginal tax rate is 25%, and MARR is an after-tax 12%. Determine which alternative is less costly, based upon comparison of after-tax annual worth. Show the AW values used to make your decision: Alternative 1: $

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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Concept explainers

Management by Exception

A manager’s job is a very tough one. A manager needs to look at the various areas of work and as a manager he has to look after two or more important jobs or activities at the same time for the growth of the business. In order to do all these things in an effective manner, a manager must adopt or practice different management styles and tactics.

Question

A portable concrete test instrument used in construction for evaluating and profiling concrete surfaces (MACRS-GDS 5-year
property class) is under consideration by a construction firm for $22,500. The instrument will be used for 6 years and be worth
$3,000 at that time. The annual cost of use and maintenance will be $9,500. Alternatively, a more automated instrument (same
property class) available from the manufacturer costs $28,500, with use and maintenance costs of only $9,000 and salvage value
after 6 years of $2,000. The marginal tax rate is 25%, and MARR is an after-tax 12%.
Determine which alternative is less costly, based upon comparison of after-tax annual worth.
Show the AW values used to make
your
decision:
Alternative 1: $
Alternative 2: $
Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±10.

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