A European candy manufacturing plant manager must select a new irradiation system to ensure the safety...

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, $	–125,000	–80,000
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 9% 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 6% 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.

Expert Solution

ANSWER:

DECISION:- AS PER ANNUAL WORTH ANALYSIS SYSTEM A IS MORE ECONOMICAL

ekkarill92 answered 1 year ago

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