A granary purchases a conveyor used in the manufacture of grain for transporting, filling, or emptying. The
Question:
A granary purchases a conveyor used in the manufacture of grain for transporting, filling, or emptying. The conveyor is considered MACRS-GDS 10-year property (remember the half-year convention). It is purchased and installed for \($70,000\) with a market value for salvage purposes that decreases at a rate of 20 percent per year with a minimum of \($3,000.\) Operation and maintenance is expected to cost \($14,000\) in the first year, increasing by \($1,000\) per year thereafter. The granary is in the 40 percent tax bracket, and their after-tax MARR is 9 percent. Determine the after-tax optimum replacement interval. Do not consider a Section 1031 exchange. If the salvage value differs from the book value when replacement occurs, the difference is taxed at the normal income tax rate.
Step by Step Answer:
Principles Of Engineering Economic Analysis
ISBN: 9781118163832
6th Edition
Authors: John A. White, Kenneth E. Case, David B. Pratt