Plastic Copper Capital investment Useful (class) life Salvage value for depreciation purposes $1,000(- SVs) $5.000(-SV10) Annual expenses Market value at end of useful life $5,000 $10,000 5 years 10 years $300 $100 SO

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
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In a chlorine-fluxing installation in a large aluminum company, engineers are
considering the replacement of existing plastic pipe fittings with more expensive, but longer lived, copper fittings. The following table gives a comparison of the capital investments, lives, salvage values, and so on of the two mutually exclusive alternatives under consideration: Depreciation amounts are calculated with the SL method. Assume an income tax rate of 40% and a MARR after-taxes of 12% per year. Which pipe fitting would you select and why? Carefully list all assumptions that you make in performing the analysis.

Plastic
Copper
Capital investment
Useful (class) life
Salvage value for depreciation purposes S1,000(3SV5) $5.000(-SV10)
Annual expenses
Market value at end of useful life
$5,000
$10,000
10 years
5 years
%3D
24300
SO
24100
Transcribed Image Text:Plastic Copper Capital investment Useful (class) life Salvage value for depreciation purposes S1,000(3SV5) $5.000(-SV10) Annual expenses Market value at end of useful life $5,000 $10,000 10 years 5 years %3D 24300 SO 24100
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