(10 points) A firm needs to purchase a medical analyzer, and two alternatives are available. The following table lists the assumptions for the project.
Med. Analyzer 1
Med. Analyzer 2
Capital Investment
$190,000
$220,000
Annual gross income
$100,000
$100,000
Annual expenses
$15,000
$10,000
MACRS Recovery, yrs
5
5
Market Value, 5 yrs
$0
$0
Assume the analyzer selected will be used for a three-year contract. Assume an effective tax rate of 40% and a MARR of 10%.
a) If total taxes are to be minimized during the contract period, which analyzer should be selected?
b) If the analyzers are sold at the end of 3 years for $75,000 and $140,000, respectively, which analyzer should be selected, to minimize total taxes?
c) Assume the half-year convention does not apply in Year 3.
(10 points) A firm needs to purchase a medical analyzer, and two alternatives are available. The following table lists the assumptions for the project.
| Med. Analyzer 1 | Med. Analyzer 2 | |
| Capital Investment | $190,000 | $220,000 |
| Annual gross income | $100,000 | $100,000 |
| Annual expenses | $15,000 | $10,000 |
| MACRS Recovery, yrs | 5 | 5 |
| Market Value, 5 yrs | $0 | $0 |
Assume the analyzer selected will be used for a three-year contract. Assume an effective tax rate of 40% and a MARR of 10%.
a) If total taxes are to be minimized during the contract period, which analyzer should be selected?
b) If the analyzers are sold at the end of 3 years for $75,000 and $140,000, respectively, which analyzer should be selected, to minimize total taxes?
c) Assume the half-year convention does not apply in Year 3.
