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Q1) Eads Industrial Systems Company (EISC) is trying to make decision between two different conveyor belt systems. System A costs= $430,000, has a 4-year life, and needs $140,000 in pretax annual operating costs. System B costs $570,000, has 6-year life, and needs $89,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. EISC always requires a conveyor belt system; when one wears out, it should be replaced. If tax rate is 30 percent and discount rate is 19 percent, EAC for project A is_____ and EAC for project B is_____.Hence , firm must select project _____.

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Accounting Basics, Accounting

Category:- Accounting Basics
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