Two fixtures are being considered for a particular job in a manufacturing firm. The pertinent data for their comparison are summarized in the following table. The effective federal and state income tax rate is 55%. Depreciation recapture is also taxed at 55%. If the after-tax MARR is 10% per year, which of the two fixtures should be recommended? Assume repeatability. Capital investment Annual operating expenses Useful life Market value Depreciatia ethed Fixture X $35,000 $6,000 6 years $7,000 Fixture Y $30,000 $4,000 MACRS (CDSLith 8 years $9,000

Two fixtures are being considered for a particular job in a manufacturing firm. The pertinent data for their comparison are summarized in the following table. The effective federal and state income tax rate is 55%. Depreciation recapture is also taxed at 55%. If the after-tax MARR is 10% per year, which of the two fixtures should be recommended? Assume repeatability. Capital investment Annual operating expenses Useful life Market value Depreciatia ethed Fixture X $35,000 $6,000 6 years $7,000 Fixture Y $30,000 $4,000 MACRS (CDSLith 8 years $9,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

find AWx(10%) and AWy(10%)

Two fixtures are being considered for a particular job in a manufacturing firm. The pertinent data for their
comparison are summarized in the following table. The effective federal and state income tax rate is 55%.
Depreciation recapture is also taxed at 55%. If the after-tax MARR is 10% per year, which of the two fixtures
should be recommended? Assume repeatability.
Capital investment
Annual operating expenses
Useful life
Market value
Depreciation method
Fixture X
$35,000
$6,000
6 years
$7,000
SL to zero book value over 5 years MACRS (GDS) with 5-year recovery period
Fixture Y
$30,000
$4,000
8 years
$9,000

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