A Private Metropolitan Mass Transit System Operator Wants to Add

Essay

A private metropolitan mass transit system operator wants to add a new trolleybus to its fleet. The following information is prepared for the economic evaluation. Either trolley is to be used for 8 years and sold for the estimated salvage value. The before- tax MARR is 12.31% per year and the effective tax rate is 35%. Using SL depreciation, select a machine on the basis of after- tax annual worth analysis. $$\begin{array} { | l | l | l | } \hline \text { Alternative } & \text { T } 1 & \text { T2 } \\\hline \text { First costs } & \$ 490,000 & \$ 475,000 \\\hline \text { Annual benefits } & \$ 110,000 & \$ 93,000 \\\hline \text { Salvage value } & \$ 39,000 & \$ 34,000 \\\hline \text { Useful life, years } & 10 & 8 \\\hline\end{array}$$