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In: Finance
EDP is trying to decide between two different conveyor belt systems. System A costs $320,000, has...
EDP is trying to decide between two different conveyor belt systems. System A costs $320,000, has a four-year life, and requires $85,000 in pretax annual operating costs. System B costs $456,000, has a six-year life, and requires $54,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have a zero salvage value. Whichever system is chosen, it will not be replaced when it wears out. The tax rate is 23 percent and the discount rate is 12.5 percent.
What is the OCF for System A?
-$54,020
-$35,750
-$47,050
-$43,540
-$51,250
What is the OCF for System B?
-$35,600
-$30,200
-$24,100
-$34,200
-$28,400
Which system should the firm choose?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
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