Individual industries will use energy as LJJUZ] efficiently as it is economical to do so, and there
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Pump A will use SL depreciation over five years with an estimated SV of zero. Pump B will use the MACRS depreciation method with a class life of three years. After five years, pump A has an actual market value of $400, and pump B has an actual market value of $200.
Using the IRR method on the after-tax cash flows and a before-tax MARR of 16.67%, is the incremental investment in pump A economically justifiable? The effective income tax rate is 40%. The cost of electricity is $0.05/kWh, and the pumps are subject to a study period of five years.
MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...
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Related Book For
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
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