Calculate EAC for both conveyor belt systems

Assignment Help Financial Management
Reference no: EM131984249

Matta Manufacturing is trying to decide between two different conveyor belt systems. System A costs $212,000, has a four-year life, and requires $68,000 in pretax annual operating costs. System B costs $300,000, has a six-year life, and requires $62,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Suppose the company 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.Matta Manufacturing is trying to decide between two different conveyor belt systems. System A costs $212,000, has a four-year life, and requires $68,000 in pretax annual operating costs. System B costs $300,000, has a six-year life, and requires $62,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Suppose the company 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. Calculate the EAC for both conveyor belt systems.

Reference no: EM131984249

Questions Cloud

Reformation originate with theological issues : Reformation originate with theological issues and to what extent did the politics of particular European leaders play a role in the acceptance of Protestantism
Why do the differences in PVs occur : Say you buy a new 10 year bond with a 4% annual coupon and a face value of $1000. Why do the differences in the PVs occur?
Which one of the four primary sources : Which one of the four primary sources do you think Leo Chavez would find most useful, and how might he use it to support his arguments?
What was the impact of change : Why did the Jeffersonian worldview disappear by the mid-nineteenth century? What was the impact of this change?
Calculate EAC for both conveyor belt systems : Matta Manufacturing is trying to decide between two different conveyor belt systems. Calculate the EAC for both conveyor belt systems.
How do problems impact the information security field : Identify two to three key problems. Why do they exist? How do they impact the information security field? Who is responsible for them?
Impact of world war one on the united states and abroad : What was the impact of World War One on the United States and abroad? How did the First World War affect the United States at home as well as American society?
Two current global events or issues : Find and discuss two news articles that address two current global events or issues that relate to some aspect of world history?
Decide between two different conveyor belt systems : Matta Manufacturing is trying to decide between two different conveyor belt systems.

Reviews

Write a Review

Financial Management Questions & Answers

  Sensitivity of the ocf to changes in quantity sold

Calculate the sensitivity of the OCF to changes in the quantity sold.

  Determine incremental capital costs

An outdoor swimming pool operates during the summer months in the Midwest for 14 weeks. Water in the pool is heated to maintain a constant temperature using a natural gas heater. An electric pump is used to circulate water in the pool and is used onl..

  Qualifying stock redemption

Finch Corporation distributes property (basis of $225,000, fair market value of $300,000) to a shareholder in a distribution that is a qualifying stock redemption. The property is subject to a liability of $160,000, which the shareholder assumes. The..

  What is the basic advantage of depreciation

Depreciation Advantage: What is the basic advantage of depreciation?

  Parties had made during their prior negotiations

Jones and Clark entered into a written contract for the purchase of an apartment building by Clark. The contract was carefully drafted to set forth the agreement of the parties. It was signed by both parties. Clark subsequently claimed that the contr..

  How many months from now should the final payment be made

How many months from now should the final payment be made?

  Project with an expected cash inflow

Wilson, Inc., has a project with an expected cash inflow of $1 million at the end of Year 5. Wilson has a second project with an expected cash inflow of $200,000, to be received at the end of each year for the next five years. Required: If both proje..

  When calculating the risk of a portfolio

When calculating the risk of a portfolio, you should adjust the process by the covariance, or interrelationship, of security price dispersion. When calculating the risk of a portfolio, you should add the weighted average of the standard deviation of ..

  Resulting NPV to Drug Revolution under the base case

what is the resulting NPV to Drug Revolution under the base case scenario?

  What will be your real rate of return over two-year period

What will be your cash flow in year 1? What will be your real rate of return over the two-year period?

  Issue perpetual preferred stock

Duggins Veterinary Supplies can issue perpetual preferred stock at a price of $66.60 a share with an annual dividend of $3.25 a share. Ignoring flotation costs, what is the company's cost of preferred stock, Rps?

  Stocks them in conveniently located warehouses

Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores,

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd