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Lang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs $208,000, has a four-year life, and requires $67,000 in pretax annual operating costs.

System B costs $294,000, has a six-year life, and requires $61,000 in pretax annual operating costs. Suppose LISC always needs a conveyor belt system; when one wears out, it must be replaced. Assume the tax rate is 34 percent and the discount rate is 8 percent.

Calculate the EAC for both conveyor belt systems. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

EAC

System A = $

System B = $

Which conveyor belt system should the firm choose? System A or System B

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92805091

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