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Which project should the firm choose

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Question - Kingsmill Industrial Systems Company (KISC) is trying to decide between two different conveyor belt systems. System A costs $290,000, has a four-year life, and requires $80,000 in pre-tax annual operating costs. System B costs $375,000, has a six-year life, and requires $74,000 in pre-tax annual operating costs. Both systems are to be depreciated at 30 percent per year (Class 10) and will have no salvage value.  The tax rate is 34 percent and the discount rate is 8 percent. KISC always needs conveyor belt system, when one wears out, it must be replaced. Which project should the firm choose?

Reference no: EM133010408

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