3. 23.

Comparing mutually exclusive projects [LO 10.1] Ginninderra Rock Quarry Limited is trying to decide between two different conveyor belt systems. System A costs $265 000, has a four-year life and requires $73 000 in pretax annual operating costs. System B costs

$345 000, has a six-year life and requires $67 000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Whichever project is chosen, it will not be replaced when it wears out. If the tax rate is 30 per cent and the discount rate is 8 per cent, which project should the firm choose?