Which freezer should select based on after-tax present worth

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Reference no: EM131506326

Question: A biotech company has an effective income tax rate of 40%. Recaptured depreciation is also taxed at the rate of 40%. The company must choose one of the following mutually exclusive cryogenic freezers for its tissue samples. The after-tax MARR is 12% per year. Which freezer should be selected based on after-tax present worth?
                                                                Freezer 1    Freezer 2
Capital investment    $10,000    $30,000
Annual benefit    $3,000 $9,000
Depreciation method    SL    MACRS
Depreciable life 3 years                        3 years
IRS approved SV for    $2,000    $0
depreciation Useful life                                   5 years    5 years
Actual MV at end of    $2,000 $2,000
useful life

Reference no: EM131506326

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