Sar Homework: Chapter 7 – Depreciation & After-Tax Analysis core: 0 of 1 pt + 6 of 7 (5 complete) HW Score: 71.43%, 5 of 7 roblem 7-37 (algorithmic)
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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 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). Capital investment Annual operating expense Now Baghouse Now ESP $1,094,500 $942,000 116,000 71,600
The life of both alternatives is 10 years, the effective income tax rate is 23%, and the after-tax MARR is 7% 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.
Click the icon to view the GDS Recovery Rates (x) for the 7-year property class.
Click the icon to view the interest and annuity table for discrete compounding when the MARR is 7% per year.
Calculate the PW value for the new baghouse. PWBaghouse (7%) = $0.826 million (Round to three decimal places.)
