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detailed please A company is investigating two freezers to choose from for its tissue samples. Both freezers have a useful life of 5 years. Freezer
detailed please
A company is investigating two freezers to choose from for its tissue samples. Both freezers have a useful life of 5 years. Freezer 1 has a capital investment of $16,000. Its net annual benefit is $3,500 per year and it can be sold for $4,000 at the end of its useful life. This asset is depreciated using the Straight Line (SL) method with the recovery period of only 3 years (which means that there is no depreciation in years 4 and 5 within the useful life). The salvage value approved by IRS for depreciation is also $4,000. Freezer 2 has a capital investment of $25,000. Its annual benefit per year is $10,000 and its market value at the end of its useful life is $3,000. This asset is depreciated using the MACRS (GDS) method with the recovery period of 3 years. Which freezer should be selected based on after-tax present worth? The effective income tax rate is 40% and after-tax MARR is 10% per year Step by Step Solution
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