Question
Hagar Industrial Systems Company (HISC) is trying to decide between two different conveyor belt systems. System A costs $252,000, has a four-year life, and requires
Hagar Industrial Systems Company (HISC) is trying to decide between two different conveyor belt systems. System A costs $252,000, has a four-year life, and requires $78,000 in pretax annual operating costs. System B costs $354,000, has a six-year life, and requires $72,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. HISC 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. |
What is the EAC for each project? |
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