The annual worth analysis for system A is determined to be $ The annual worth analysis for system Bis determined to be $1 System O D is selected.
The annual worth analysis for system A is determined to be $ The annual worth analysis for system Bis determined to be $1 System O D is selected.
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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Transcribed Image Text:A European candy manufacturing plant manager must select a new irradiation system to ensure the safety of specific ingredients,
while being economical. The two alternatives available have the following estimates:
System
First Cost, $
CFBT, $ per Year
Life, Years
A
B
-150,000
60,000
-80,000
20,000
5
The company is in the 35% tax bracket and assumes classical straight line depreciation for alternative comparisons performed at
an after-tax minimum acceptable rate of return (MARR) of 8% per year. A salvage value of zero is used when depreciation is
calculated; however, system B can be sold after 5 years for an estimated 8% of its first cost. System A has no anticipated salvage
value. Determine which is more economical using an annual worth (AW) analysis worked by hand.
The annual worth analysis for system A is determined to be $1
The annual worth analysis for system Bis determined to be $
System B
D is selected.
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