Which device should the hospital choose the after-tax

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Reference no: EM13224818

A hospital is considering to purchase one of two different medical devices to perform a specific task. Both devices will perform an accurate analysis. Device A costs $170,000 initially, whereas device B (the deluxe model) costs $180,000. It has been estimated that the cost of maintenance will be $7,800 for device A and $4,500 for device B in the first year. Management expects these costs to increase 15% 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.

Reference no: EM13224818

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