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P r oject E v aluation. Blooper Industries must replace its magnoosium purification system.
Quick & Dirty Systems sells a relatively cheap purification system for $10 million. The sys- tem will last 5 years. Do-It-Right sells a sturdier but more expensive system for $12 million; it will last for 8 years. Both systems entail $1 million in operating costs; both will be de- preciated straight line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm’s tax rate is 35 percent, and the discount rate is
12 percent. Which system should Blooper install?
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