A portable concrete test instrument used in construction for evaluating and profiling concrete surfaces (MACRS-GD 5-year property class) is under consideration by a construction firm for $21,500. 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 $5,500. Alternatively, a mor automated instrument (same property class) available from the manufacturer costs $26,000, with use and maintenance costs of only $7,500 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. Alternative 1 + Show the AW values used to make your decision: Alternative 1: $ -8835.96 Alternative 2: $ -11702.16 Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±10.

A portable concrete test instrument used in construction for evaluating and profiling concrete surfaces (MACRS-GD 5-year property class) is under consideration by a construction firm for $21,500. 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 $5,500. Alternatively, a mor automated instrument (same property class) available from the manufacturer costs $26,000, with use and maintenance costs of only $7,500 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. Alternative 1 + Show the AW values used to make your decision: Alternative 1: $ -8835.96 Alternative 2: $ -11702.16 Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±10.

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

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

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 $21,500. 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 $5,500. Alternatively, a more
automated instrument (same property class) available from the manufacturer costs $26,000, with use and
maintenance costs of only $7,500 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. Alternative 1
Show the AW values used to make your decision:
Alternative 1: $
-8835.96
Alternative 2: $
-11702.16
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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