A portable concrete test instrument used in construction for evaluating and profiling concrete surfaces (MACRS-GDS 5-year property class) is under consideration by a construction firm for $20,000. The instrument will be used for 6 years and be worth $1,500 at that time. The annual cost of use and maintenance will be $13,000. Alternatively, a more automated instrument (same property class) available from the manufacturer costs $33,000, with use and maintenance costs of only $9,500 and salvage value after 6 years of $3,500. The marginal tax rate is 25%, and MARR is an after-tax 12%. Determine which alternative is less costly, based upon comparison of after-tax annual worth. Show the AW values used to make your decision: Alternative 1: $ Alternative 2: $
A portable concrete test instrument used in construction for evaluating and profiling concrete surfaces (MACRS-GDS 5-year property class) is under consideration by a construction firm for $20,000. The instrument will be used for 6 years and be worth $1,500 at that time. The annual cost of use and maintenance will be $13,000. Alternatively, a more automated instrument (same property class) available from the manufacturer costs $33,000, with use and maintenance costs of only $9,500 and salvage value after 6 years of $3,500. The marginal tax rate is 25%, and MARR is an after-tax 12%. Determine which alternative is less costly, based upon comparison of after-tax annual worth. Show the AW values used to make your decision: Alternative 1: $ Alternative 2: $
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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