Explaining and comparing mutually exclusive projects

Reference no: EM1312762

Explaining and Comparing Mutually Exclusive projects

Eads Industrial System Company (EISC) is trying to decide between two different conveyor belt systems. System A costs $430,000, has a 4 - year life, and requires $140,000 in pre-tax annual operating costs. System B costs $570,000, has a 6-year life, and requires $89,000 in pre-tax annual operating costs. Both systems are to be depreciated straight -line to zero over their lives and will have zero salvage value. EISC always needs a conveyor belt system; when one wears out, it must be replaced. If the tax rate is 30 percent and the discount rate is 19 percent, the EAC for project A is $___________ and the EAC for project B is $____________. Therefore, the firm should choose project_________. (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places, e.g. 32.16.)

Reference no: EM1312762

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