Which device should the hospital choose

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Reference no: EM131506723

Question: A hospital has two different medical devices it can purchase to perform a specific task. Both devices will perform an accurate analysis. Device A costs $100,000 initially, whereas device B (the deluxe model) costs $150,000. It has been estimated that the cost of maintenance will be $5,000 for device A and $3,000 for device B in the first year. Management expects these costs to increase 10% per year. The hospital uses a six year study period, and its effective income tax rate is 50%. Both devices qualify as five-year MACRS (GDS) property. Which device should the hospital choose if the after-tax, market-based MARR is 8% per year (i_m)?

Reference no: EM131506723

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