A Logistics Company Is Deciding Between Two Models of Semi-

question 8

Essay

A logistics company is deciding between two models of semi- trailer trucks to add to its fleet. The manager has prepared the following information for the economic evaluation. The new trucks are to be used for 7 years and sold for the estimated salvage value. The before- tax MARR is 16.39% per year and the effective tax rate is 39%. Select a machine on the basis of after- tax annual worth analysis using MACRS with a 5- year recovery period. $$\begin{array} { | l | l | l | } \hline \text { Alternative } & \text { P1 } & \text { P2 } \\\hline \text { First costs } & \$ 245,000 & \$ 230,000 \\\hline \text { Net annual benefits } & \$ 155,000 & \$ 140,000 \\\hline \text { Salvage value } & \$ 44,500 & \$ 37,500 \\\hline \text { Life, years } & 10 & 10 \\\hline\end{array}$$

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