38. Two investments involving a granary qualify for different property classes.

Investment A costs $70,000 with $3000 salvage value after 16 years and is depreciated as MACRS-GDS in the 10-year property class. Investment B costs $110,000 with a $4000 salvage value after 16 years and is in the MACRS-GDS 5-year property class. Operation and maintenance for each is expected to be $18,000 and $14,000 per year, respectively. The marginal tax rate is 40%, and MARR is 9% after taxes.

a. Determine which alternative is less costly, based upon comparison of after-tax annual worth.

b. What must the cost of the second (more expensive) investment be for there to be no economic advantage between the two?