A portable concrete test instrument used in construction for evaluating and profiling concrete surfaces (MACRS-GDS 5-year property class) is under consideration by a construction firm for $24,000. The instrument will be used for 6 years and be worth $2,000 at that time. The annual cost of use and maintenance will be $6,000. Alternatively, a more automated instrument (same property class) available from the manufacturer costs $25,500, with use and maintenance costs of only $9,500 and salvage value after 6 years of $4,000. The marginal tax rate is 25%, and MARR is an after-tax 12%.
Required:
Determine which alternative is less costly, based upon comparison of after-tax annual worth.
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