Both systems are to be depreciated straight-line to zero


Hagar Industrial Systems Company (HISC) is trying to decide between two different conveyor belt systems. System A costs $260,000, has a four-year life, and requires $80,000 in pretax annual operating costs. System B costs $366,000, has a six-year life, and requires $74,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. HISC always needs a conveyor belt system; when one wears out, it must be replaced. Assume the tax rate is 30 percent and the discount rate is 9 percent. What is the EAC for each project?

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Financial Management: Both systems are to be depreciated straight-line to zero
Reference No:- TGS02323060

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