A large profitable corporation is considering two mutually exclusive capital investments: Alt A Alt B Initial cost
Question:
A large profitable corporation is considering two mutually exclusive capital investments:
Alt A Alt B
Initial cost $11.000 $33,000
Uniform annual benefit 3,000 9,000
End-of-depreciable-life 2,000 3,000
Depreciation method SL SOYD
End-of -useful-life 2,000 5,000
Salvage value obtained
Depreciable life, in years 3 4
Useful life, in years 5 5
If the firm's after-tax minimum attractive rate of return is 12% and its incremental income tax rate is 34%, which project should be selected?
DepreciationDepreciation is an important concept in accounting. By definition, depreciation is the wear and tear in the value of a noncurrent asset over its useful life. In simple words, depreciation is the cost of operating a noncurrent asset producing... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Alternative A Year BTCF SL Dep TI 34 IncTax ATCF 0 1100...View the full answer
