Lang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A
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Question:
Lang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs $220,000, has a four-year life, and requires $70,000 in pretax annual operating costs. System B costs $312,000, has a six-year life, and requires $64,000 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 andround your answers to 2 decimal places, e.g., 32.16.) |
EAC | |
System A | $ |
System B | $ |
Which conveyor belt system should the firm choose? |
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