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Which system should the company choose

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Question - Hagar Industrial Systems Company is trying to decide between two different conveyor belt systems. System A costs $290,000 has a four year life and requires $85,000 in pretax annual operating costs. System B costs $405,000 has a six year life and requires $75,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Whichever system is chosen, it will not be replaced when it wears out. If the tax rate is 34% and discount rate is 11%, which system should the company choose.

Reference no: EM132858883

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