Question
In a chlorine-fluxing installation in a large aluminum company, engineers are considering the replacement of existing plastic pipe fittings with more expensive but longer lived,
In a chlorine-fluxing installation in a large aluminum company, engineers are considering the replacement of existing plastic pipe fittings with more expensive but longer lived, copper fittings. the following table gives a comparison of the capital investments, lives, salvage values, and so on of the two mutually exclusive alternatives under consideration:
plastic | copper | |
capital investment | $5000 | $10000 |
useful life | 5 years | 10 years |
salvage value for depreciation purposes | (after 5 years) $1000 | (after 10 years) $5000 |
annual expenses | $300 | $100 |
market value at end of useful life | $0 | $0 |
Depreciation amounts are calculated with the SL method. assume an income tax rate of 40% and an after-taxes MARR of 12% per year. which pipe fitting would you select and why? carefully list all assumptions that you make in performing the analysis.
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