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A heat exchanger purchased by Hot Spot Manufacturing cost $24,000. The exchanger will save $4,500 in...

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Economics

A heat exchanger purchased by Hot Spot Manufacturing cost$24,000. The exchanger will save $4,500 in each of the next 10years. Hot Spot will use SOYD depreciation over a six-yeardepreciable life. The declared salvage value is $3,000. It isexpected the exchanger will be sold for the declared value. HotSpot pays taxes at a combined rate of 42% and has a MARR of 8%. Wasthe purchased justified?

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