Question
13) A European candy manufacturing plant manager must select a new irradiation system to ensure the safety of specific ingredients, while being economical. The two
13) 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 | A | B |
First Cost, $ | 110,000 | 75,000 |
CFBT, $ per Year | 60,000 | 20,000 |
Life, Years | 3 | 5 |
The company is in the 35% tax bracket and assumes classical straight line depreciation for alternative comparisons performed at an after-tax minimum acceptable rate of return (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 16% of its first cost. System A has no anticipated salvage value. Determine which is more economical using an annual worth (AW) analysis worked by hand.
The annual worth analysis for system A is determined to be $ ( )
The annual worth analysis for system B is determined to be $ ( )
System (Click to select) B OR A is selected.
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