A granary has two options for a conveyor used in the manufacture of grain for transporting, filling, or emptying. One conveyor can be purchased and installed for $ 60,000 with $ 4,500 salvage value after 16 years. The other can be purchased and installed for $120,000 with $ 4,000 salvage value after 16 years. Operation and maintenance for each is expected to be $ 21,000 and $ 18,000 per year, respectively. The granary uses MACRS-GDS depreciation, has a marginal tax rate of 25%, and has a MARR of 9% after taxes. Determine which alternative is less costly, based upon comparison of after-tax annual worth.

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Chapter1: Making Economics Decisions
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A granary has two options for a conveyor used in the manufacture of grain for transporting, filling, or emptying. One conveyor can be purchased and installed for $ 60,000 with $ 4,500 salvage value after 16 years. The other can be purchased and installed for $120,000 with $ 4,000 salvage value after 16 years. Operation and maintenance for each is expected to be $ 21,000 and $ 18,000 per year, respectively. The granary uses MACRS-GDS depreciation, has a marginal tax rate of 25%, and has a MARR of 9% after taxes.

Determine which alternative is less costly, based upon comparison of after-tax annual worth.

 

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