Hagar Industrial Systems Company (HISC) is trying to decide between two different conveyor belt systems. System...

Hagar Industrial Systems Company (HISC) is trying to decide between two different conveyor belt systems. System A costs $290,000, has a 4-year life, and requires $93,000 in pretax annual operating costs. System B costs $370,000, has a 6-year life, and requires $87,000 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 project is chosen, it will not be replaced when it wears out. The tax rate is 25 percent and the discount rate is 8 percent.

Calculate the NPV for both conveyor belt systems.

Which conveyor belt system should the firm choose?

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Expert Solution

jeff jeffy answered 1 year ago

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