Two investments involving a virtual mold apparatus for producing dental crowns q

Question

Two investments involving a virtual mold apparatus for producing dental crowns qualify for different property classes. Investment A has a cost of $61,500.00, lasts 9 years with no salvage value, and costs $150,000 per year in operating expenses. It is in the 3-year property class. Investment B has a cost of $86,500.00, lasts 9 years with no salvage value, and costs $125,000 per year. Investment B, however, is in the 7-year property class. The company marginal tax rate is 40%, and MARR is an after-tax 10%.

A) Based upon the use of MACRS-GDS depreciation, compare the AW of each alternative.

AWA = $

AWB = $

B) What must be Investment B's cost of operating expenses for these two investments to be equivalent? $

Explanation / Answer

Annual worth of A = 156833 is the total cost of depretiation + total cost of maintanance

AWB = 134611 total cost of dep + maintananace

B must be selected as it costs less

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