A company wants to purchase a filtration equipment. There are two possible alternatives that provide the same service. The data for the two alternatives follow:

The income tax rate is 35%, and straight-line depreciation method is used for both methods. If the acceptable rate of return is 15%, which of the alternatives should be selected based on incremental return?

Alternative 2 Fixed-capital investment Annual operating expenses Salvage value Service life Alternative 1 $ 25,000 $6,000 0 7 years $ 15,000 $ 11,000 0 7 years