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LODH Company, must install safety devices throughout its plant or it will lose its insurance...

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Accounting

LODH Company, must install safety devices throughout its plant or it will lose its insurance coverage. Two alternatives are acceptable to the insurer. The first costs $400 000 to install and $80 000 to maintain annually. The second costs $600 000 to install and $40 000 to maintain annually. Each has a 10-year income tax life and a 10-year useful life. LODHs discount rate is 12 per cent, its marginal tax rate is 30 per cent and it uses straight-line depreciation.

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