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In a chlorine-fluxing installation in a large aluminum company, engineers are considering the replacement of existing plastic pipe fittings with more expensive but longer lived, copper fittings. the following table gives a comparison of the capital investments, lives, salvage values, and so on of the two mutually exclusive alternatives under consideration:

	plastic	copper
capital investment	$5000	$10000
useful life	5 years	10 years
salvage value for depreciation purposes	(after 5 years) $1000	(after 10 years) $5000
annual expenses	$300	$100
market value at end of useful life	$0	$0

Depreciation amounts are calculated with the SL method. Assume an income tax rate of 40% and an after-taxes MARR of 12% per year. which pipe fitting would you select and why? carefully list all assumptions that you make in performing the analysis.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9946688

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