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 $70,000 with $3,000 salvage value after 16 years. The other can be purchased and installed for $110,000 with $4,000 salvage value after 16 years. Operation and maintenance for each is expected to be $18,000 and $14,000 per year, respectively. The granary uses MACRS-GDS depreciation, has a marginal tax rate of 40%, and has a MARR of 9% after taxes.
A) Determine which alternative is less costly, based upon comparison of after-tax annual worth.
Show the AW values used to make your decision:
Conveyor 1: $ ?
Conveyor 2: $ ?
B) What must the cost of the second (more expensive) conveyor be for there to be no economic advantage between the two?
Cost of the second conveyor: $ ?
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