A granary has two options for a conveyor used in the manufacture of grain for transporting, filling, or emptying. One conveyor can be purchased and installed for $80,000 with $1,500 salvage value after 16 years. The other can be purchased and installed for $95,000 with $5,500 salvage value after 16 years. Operation and maintenance for each is expected to be $16,500 and $15,500 per year, respectively. The granary uses MACRS-GDS depreciation, has a marginal tax rate of 40%, and has a MARR of 9% after taxes.
Determine which alternative is less costly, based upon comparison of after-tax annual worth. (Alternative 1 or Alternative 2)
Show the AW values used to make your decision:
Conveyor 1: $
Conveyor 2: $