A European candy manufacturing plant manager must select a new irradiation system to ensure the safety of

Question:

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, $ A в -150,000 -85,000 CFBT, $ per year Life, years 60,000 3 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 MARR of 6% 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 10% of its first cost. System A has no anticipated salvage value. Determine which is more economical using an AW analysis worked by hand.

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... 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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