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Calculate the eac for conveyor belt systems

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Peyton 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 22 percent and the discount rate is 9 percent. Calculate the EAC for both conveyor belt systems.

Reference no: EM132664361

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