Two investments involving a virtual mold apparatus for producing dental crowns qualify for different property classes. Investment
Question:
Two investments involving a virtual mold apparatus for producing dental crowns qualify for different property classes. Investment A has a cost of \($58,500,\) lasts 9 years with no salvage value, and costs \($150,000\) per year in operating expenses. It is in the 3-year property class. Investment B has a cost of \($87,500,\) lasts 482 CHAPTER 10 / AFTER-TAX ECONOMIC ANALYSIS 9 years with no salvage value, and costs \($125,000\) per year. Investment B, however, is in the 7-year property class. The company marginal tax rate is 40 percent, and MARR is an after-tax 10 percent.
a. Based upon the use of MACRS-GDS depreciation, compare the AW of each alternative to determine which should be selected.
b. What must be Investment B’s cost of operating expenses for these two investments to be equivalent?
Step by Step Answer:
Principles Of Engineering Economic Analysis
ISBN: 9781118163832
6th Edition
Authors: John A. White, Kenneth E. Case, David B. Pratt