Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 26

The defender in a catalytic oxidizer manufacturing plant has a market value of $130,000 and expected annual operating costs of $70,000 with no salvage value after its remaining life of 3 years. The depreciation charges for the next 3 years will be $69,960, $49,960, and $35,720. Using an effective tax rate of 35%, determine the CFAT for next year only that should be used in a present worth equation to compare this defender against a challenger that also has a 3-year life. Assume the company's aftertax MARR is 12%.