Nuclear safety devices installed several years ago have been depreciated from a first cost Modified Accelerated Cost Recovery System (MACRS). The devices can be sold on the use estimated $15,000, or they can be retained in service for 5 more years with a $9000 upgra expenses (OE) of $6000 per year. The upgrade investment will be depreciated over 3 year challenger is a replacement with newer technology at a first cost of $40,000, n = 5 years, have operating expenses of $7000 per year. a 5-year study period, an effective tax rate of 41%, an after-tax minimum acceptable rate of re amption of classical straight line depreciation (no half-year convention) to perform an after-tax
Nuclear safety devices installed several years ago have been depreciated from a first cost Modified Accelerated Cost Recovery System (MACRS). The devices can be sold on the use estimated $15,000, or they can be retained in service for 5 more years with a $9000 upgra expenses (OE) of $6000 per year. The upgrade investment will be depreciated over 3 year challenger is a replacement with newer technology at a first cost of $40,000, n = 5 years, have operating expenses of $7000 per year. a 5-year study period, an effective tax rate of 41%, an after-tax minimum acceptable rate of re amption of classical straight line depreciation (no half-year convention) to perform an after-tax
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
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5.
![Nuclear safety devices installed several years ago have been depreciated from a first cost of $200,000 to zero using the
Modified Accelerated Cost Recovery System (MACRS). The devices can be sold on the used equipment market for an
estimated $15,000, or they can be retained in service for 5 more years with a $9000 upgrade now and an operating
expenses (OE) of $6000 per year. The upgrade investment will be depreciated over 3 years with no salvage value. The
challenger is a replacement with newer technology at a first cost of $40,000, n=5 years, and S= 0. The new units will
have operating expenses of $7000 per year.
Use a 5-year study period, an effective tax rate of 41%, an after-tax minimum acceptable rate of return (MARR) of 10% per year, and an
assumption of classical straight line depreciation (no half-year convention) to perform an after-tax AW-based replacement study.
The annual worth of the defender is determined to be $10000
The annual worth of the challenger is determined to be $
Since the annual worth of the defender is smaller, it is retained.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8f37abaf-2066-41c2-a0f5-8b99036cd88f%2F4cfedb92-17f0-4e1d-89ca-f6f35244e684%2Fr1rmtb_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Nuclear safety devices installed several years ago have been depreciated from a first cost of $200,000 to zero using the
Modified Accelerated Cost Recovery System (MACRS). The devices can be sold on the used equipment market for an
estimated $15,000, or they can be retained in service for 5 more years with a $9000 upgrade now and an operating
expenses (OE) of $6000 per year. The upgrade investment will be depreciated over 3 years with no salvage value. The
challenger is a replacement with newer technology at a first cost of $40,000, n=5 years, and S= 0. The new units will
have operating expenses of $7000 per year.
Use a 5-year study period, an effective tax rate of 41%, an after-tax minimum acceptable rate of return (MARR) of 10% per year, and an
assumption of classical straight line depreciation (no half-year convention) to perform an after-tax AW-based replacement study.
The annual worth of the defender is determined to be $10000
The annual worth of the challenger is determined to be $
Since the annual worth of the defender is smaller, it is retained.
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