Mutually exclusive projects based on eac and npv

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Reference no: EM1312079

Comparison of Mutually Exclusive Projects based on EAC & NPV.

Eads Industrial Systems 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 pretax annual operating costs. System B costs $510,000, has a 6-year life, and requires $67,000 in pretax annual operating costs. Both the systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Whichever project is choosen, it will not be replaced when it wears out. If the tax rate is 32 percent and the discount rate is 20 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. Do not include the percent sign (%). Round your answers to 2 decimal places, e.g. 32.16.)

Reference no: EM1312079

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