Explaining and comparing mutually exclusive projects

Reference no: EM1312770

Explaining and Comparing mutually exclusive projects

Eads Industrial System Company (EISC) is trying to decide between two different conveyor belt systems. System A costs $432,000, has a 4 - year life, and requires $122,000 in pre-tax annual operating costs. System B costs $510,000, has a 6-year life, and requires $67,000 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. Whichever project is chosen, it will not be replaced when it wears out. If the tax rate is 32 percent, the NPV for project A is $___________ and the NPV 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: EM1312770

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