Use in refuse-power edelectrical generating plant

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A currently owned shredder originally costing $800,000 was purchased 6 years ago for use in a refuse-power edelectrical generating plant. It was depreciated as MACRS-GDS 5-year property due to its status as analternative energy item. It has a present net realizable value of $210,000 and is expected to have a market value of $10,000 after 4 more years. Operating and maintenance disbursements are $100,000 per year. An equivalent shredder can be leased for $200 per day plus $80 per hour of actual use as determined by an hour meter, with both components assumed to be paid at year-end. Actual use is expected to be 1,500 hours and 250 days per year. Use the cash ?ow approach (insider’s approach), a 4-year planning horizon, a tax rate of 40 percent, andan after-tax MARR of 9 percent to perform an after-tax analysis to determine the preferred alternative using the annual cost criterion.

a. Use only the above information. (11.2.2)

b. Consider the addition of a third alternative, to operate without any shredder, at an annual cost of $190,000.(11.2.2)

Reference no: EM131097257

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