$20,000 12 years $30,000 8 years $0 $188,000 $170,000 Capital Investment Life Salvage Value Annual Receipts $4,000 $150,000 $138,000 Annual Disbursements

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
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Two alternative machines will produce the same product, but one is capable of higher-quality work, which can be expected to return greater revenue. The following are relevant data:

 

Determine which is the better alternative, assuming using straight-line depreciation method, an income tax rate of 40% and an after-tax MARR of 10%.

Machine A
Machine B
$20,000
$30,000
8 years
Capital Investment
Life
12 years
Salvage Value
Annual Receipts
$4,000
$150,000
$138,000
$0
$188,000
$170,000
Annual Disbursements
Transcribed Image Text:Machine A Machine B $20,000 $30,000 8 years Capital Investment Life 12 years Salvage Value Annual Receipts $4,000 $150,000 $138,000 $0 $188,000 $170,000 Annual Disbursements
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