What would be the additional annual revenue for method a

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Reference no: EM13231955

A firm is considering two different methods of solving a production problem. Both methods are expected to be obsolete in six years. Method A would cost $80,000 initially and have annual operating costs of $22,000. Method B would cost %52,000 initially and have annual operating costs of $17,000. The salvage value realized with method A would be $20,000 and with method B would be $15,000. Method A would generate $16,000 of revenue per year more than Method B. Investments in both methods depreciate as a 5 year MACRS property class. Marginal tax = 40%. MARR=20%. What would be the additional annual revenue for method A such that the firm would be indifferent in its choice of method?

Reference no: EM13231955

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