Two investments involving a virtual mold apparatus for producing dental crowns qualify for different property classes. Investment A has a cost of $53,600, lasts 9 years with no salvage value, and costs $150,000 per year in operating expenses. It is in the 3-year property class. Investment B has a cost of $84,500.00, lasts 9 years with no salvage value, and costs $125,000 per year. Investment B, however, is in the 7-year property class. The company marginal tax rate is 25%, and MARR is an after-tax 10%. Based upon the use of MACRS-GDS depreciation, compare the AW of each alternative.AWA = AWB = Which should be selected? What must be Investment B's cost of operating expenses for these two investments to be equivalent? $ MACRS-GDS percentages for 3-, 5-, 7-, and 10-year property are 200%DBSLH and 15- and 20-year property are 150% DBSLHTABLE 8.33-Year5-Year7-Year10-Year15-Year20-YearEOYProperty Property Property Property Property Property133.3320.0014.2910.005.003.75044.4532.0024.4918.009.507.219314.8119.2017.4914.408.556.67747.4111.5212.4911.527.706.17711.528.939.226.935.7135.768.927.376.235.28578.936.555.904.88884.466.555.904.52296.565.914.462106.555.904.461113.285.914.462125.904.461135.914.462145.904.461155.914.462162.954.461174.462184.461194.4624.461212.2316.202.

Answered: Image /qna-images/answer/11f5a7d9-bae7-4962-928d-5986e965e835.jpg

Answered: Two investments involving a virtual…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

Two investments involving a virtual mold apparatus for producing dental crowns qualify for different property classes. Investment A has a cost of $53,600, lasts 9 years with no salvage value, and costs $150,000 per year in operating expenses. It is in the 3-year property class. Investment B has a cost of $84,500.00, lasts 9 years with no salvage value, and costs $125,000 per year. Investment B, however, is in the 7-year property class. The company marginal tax rate is 25%, and MARR is an after-tax 10%.

Based upon the use of MACRS-GDS depreciation, compare the AW of each alternative.
AW_A =
AW_B =
Which should be selected?
What must be Investment B's cost of operating expenses for these two investments to be equivalent? $

MACRS-GDS percentages for 3-, 5-, 7-, and 10-year property are 200%
DBSLH and 15- and 20-year property are 150% DBSLH
TABLE 8.3
3-Year
5-Year
7-Year
10-Year
15-Year
20-Year
EOY
Property Property Property Property Property Property
1
33.33
20.00
14.29
10.00
5.00
3.750
44.45
32.00
24.49
18.00
9.50
7.219
3
14.81
19.20
17.49
14.40
8.55
6.677
4
7.41
11.52
12.49
11.52
7.70
6.177
11.52
8.93
9.22
6.93
5.713
5.76
8.92
7.37
6.23
5.285
7
8.93
6.55
5.90
4.888
8
4.46
6.55
5.90
4.522
9
6.56
5.91
4.462
10
6.55
5.90
4.461
11
3.28
5.91
4.462
12
5.90
4.461
13
5.91
4.462
14
5.90
4.461
15
5.91
4.462
16
2.95
4.461
17
4.462
18
4.461
19
4.462
4.461
21
2.231
6.
20
2.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions