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Dual OIU _ HOOIUI‘IVIEI‘ I 11") Question 1 (4 marks) You are evaluating two different pollution control devices: (a) A filtration system which...

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Question 1 ( 4 marks )
You are evaluating two different pollution control devices :
( a) A filtration system which costs $1 . 1 million to install and $60 ,000 annually to operate . It
would have to be replaced every five years .
(6) A precipitation system which costs $1 . 9 million to install , but only $10 ,000 per year to
operate . The precipitation equipment has an operating life of eight years .
The company rents its factory and both systems are considered leasehold improvements so
straight-line capital cost allowance is used throughout , and neither system has any salvage*
value . Which system should the company select if the cost of capital is 12% and the tax
rate is 40% ? Ignore the half - year rule .
We calculated the EAC for the filtration system in class . For your assignment , calculate
the EAC for the precipitation system . ( 3 marks )

Top Answer

(a) EAR for filtration system =... View the full answer

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