Question
Letang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs $238,000, has a 5-year life, and requires
Letang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs $238,000, has a 5-year life, and requires $113,000 in pretax annual operating costs. System B costs $830,000, has a 7-year life and requires $120,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have a zero salvage value. Whichever system is chose, it will not be replaced when it wears out. The tax rate is 21 percent and the discount rate is 6 percent. What is the NPV of the project you should accept?
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