Outdated equipment with environmental-friendly equipment

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A nuclear power plant is planning to replace the outdated equipment with more environmental-friendly equipment. The new equipment has an initial cost of $410,000. The equipment is expected to yield an annual savings of $190,000 each year for the first 4 years and $191,200 each year thereafter. The MACRS with a 15-year recovery period is to be used for tax purposes. Should the equipment be purchased if the equipment will be sold for $148,263.00 at the end of year 10? Assume an effective tax of 38% and a before-tax MARR of 16.13% per year.

Reference no: EM131974213

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