Question
Kingsmill Industrial Systems Company (KISC) is trying to decide between two different conveyor belt systems. System A costs $290,000, has a four-year life, and requires
Kingsmill Industrial Systems Company (KISC) is trying to decide between two different conveyor belt systems. System A costs $290,000, has a four-year life, and requires $80,000 in pre-tax annual operating costs. System B costs $375,000, has a six-year life, and requires $74,000 in pre-tax annual operating costs. Both systems are to be depreciated at 30% per year (Class 10) and will have no salvage value. Whichever project is chosen, it will not be replaced when it wears out. The tax rate is 34% and the discount rate is 8%.
Calculate the PV for both conveyor belt systems. (Negative answers should be indicated by a minus sign. Do not round your intermediate calculations. Round the final answers to 2 decimal places. Omit $ sign in your response.)
| PV | |
| System A | |
| System B | |
Which conveyor belt system should the firm choose?
multiple choice
-
System A System B
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