Both systems are to be depreciated at 30 per year class 10


Comparing mutually exclusive projects. Kingsmill industrial systems company (KISC) is trying to decide between different conveyor belt systems. System A costs $360,000, has a four year life, and requires $135,000 in pre-tax annual operating costs. System B costs $430,000, has a six-year life, and requires $98,000 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. If the tax rate is 34% and the discount rate is 12%, which project should the firm choose? Conduct the analysis and offer a brief recommendation.

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Finance Basics: Both systems are to be depreciated at 30 per year class 10
Reference No:- TGS01387350

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