Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
An industrial coal-fired boiler for process steam is equipped with a 10-year-old electrostatic precipitator (ESP). Changes in coal quality have caused stack emissions to be in noncompliance with federal standards for particulates. Two mutually exclusive alternatives have been proposed to rectify this problem (doing nothing is not an option). The life of both alternatives is 10 years, the effective income tax rate is 40%, and the after-tax MARR is 9% per year. Both alternatives qualify as seven-year MACRS (GDS) properties. Make a recommendation regarding which alternative to select based on an after-tax analysis.
Transcribed Image Text:New Baghouse New ESP
Capital investment
Annual operating expenses
$1,140,000
$992,500
115,500
73,200
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