LymboCompany, must install safety devices throughout its plant or it will lose its insurance coverage. Two alternatives are acceptable to the insurer. The first costs $100000 to install and $20000 to maintain annually. The second costs $150000 to install and $10000 to maintain annually. Each has a five-year income tax life and a 15-year useful life.Lymbo'sdiscount rate is 12 per cent, its marginal tax rate is 30 per cent and ituses straight-line depreciation.

Required

(a)Which system should be installed? Why?

(b)IfLymbowere a not-for-profit organisation that does not pay income taxes on its operations, which system would be installed?