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Either machine is to be used for a total 10 years, then sold for the estimated salvage value. The before-tax MARR is 14%, after-tax MARR is 7%, and tax rate is 50%. Select a machine on the basis of (a) before- tax PW (b) after-tax PW using classical SK depreciation over the 10 year-life.

Either machine is to be used for a total 10 years, then sold for the estimated salvage value. The before-tax MARR is 14%, after-tax MARR is 7%, and tax rate is 50%. Select a machine on the basis of (a) before- tax PW (b) after-tax PW using classical SK depreciation over the 10 year-life.

Essentials Of Investments
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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Machine A Machine B First cost, $ -15000 -22000 Salvage value, $ 3,000 5,000 AOC, $/year -3,000 -1,500 Life, year 10 10 Either machine is to be used for a total 10 years, then sold for the estimated salvage value. The before-tax MARR is 14%, after-tax MARR is 7%, and tax rate is 50%. Select a machine on the basis of (a) before- tax PW (b) after-tax PW using classical SK depreciation over the 10 year-life.
Transcribed Image Text:Machine A Machine B First cost, $ -15000 -22000 Salvage value, $ 3,000 5,000 AOC, $/year -3,000 -1,500 Life, year 10 10 Either machine is to be used for a total 10 years, then sold for the estimated salvage value. The before-tax MARR is 14%, after-tax MARR is 7%, and tax rate is 50%. Select a machine on the basis of (a) before- tax PW (b) after-tax PW using classical SK depreciation over the 10 year-life.
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