Alternative A has an initial cost of $-130,000, an annual cash-flow before taxes of $60,000, and...
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Alternative A has an initial cost of $-130,000, an annual cash-flow before taxes of $60,000, and a depreciable life of 3 years. Alternative B has an initial cost of $ 95,000, an annual cash-flow before taxes of $20,000, and a depreciable life of 5 years. The company considering the alternatives is in the 35% tax bracket and assumes straight line depreciation with an after-tax minimum acceptable rate of return (MARR) of 8% 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 6% of its first cost. System A has no anticipated salvage value. Determine which is more economical using an annual worth (AW) analysis. The annual worth analysis for system A is determined to be $ The annual worth analysis for system B is determined to be $ System is selected. 4 Alternative A has an initial cost of $-130,000, an annual cash-flow before taxes of $60,000, and a depreciable life of 3 years. Alternative B has an initial cost of $ 95,000, an annual cash-flow before taxes of $20,000, and a depreciable life of 5 years. The company considering the alternatives is in the 35% tax bracket and assumes straight line depreciation with an after-tax minimum acceptable rate of return (MARR) of 8% 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 6% of its first cost. System A has no anticipated salvage value. Determine which is more economical using an annual worth (AW) analysis. The annual worth analysis for system A is determined to be $ The annual worth analysis for system B is determined to be $ System is selected. 4
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Lets calculate the annual worth AW for each alternative using the given information For Alternative ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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