Question
In: Finance
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 $270,000, has a 4-year life, and requires $77,000 in pretax annual operating costs. System B costs $350,000, has a 6-year life, and requires $71,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Suppose the company always needs a conveyor belt system; when one wears out, it must be replaced. Assume the tax rate is 21 percent and the discount rate is 8 percent. Calculate the EAC for both conveyor belt systems. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Which conveyor belt system should the firm choose?
System A
System B
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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...
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
$208,000, has a four-year life, and requires $67,000 in pretax
annual operating costs. System B costs $294,000, has a six-year
life, and requires $61,000 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. The tax...
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
$365,000, has a 4-year life, and requires $153,000 in pretax annual
operating costs. System B costs $445,000, has a 6-year life, and
requires $147,000 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...
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
$350,000, has a 4-year life, and requires $141,000 in pretax annual
operating costs. System B costs $430,000, has a 6-year life, and
requires $135,000 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...
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
$320,000, has a 4-year life, and requires $117,000 in pretax annual
operating costs. System B costs $400,000, has a 6-year life, and
requires $111,000 in pretax annual operating costs. Both systems
are to be depreciated straight-line to zero over their lives and
will have zero salvage value. Suppose the company always needs a
conveyor belt system; when one wears out, it must...
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
$285,000, has a 4-year life, and requires $89,000 in pretax annual
operating costs. System B costs $365,000, has a 6-year life, and
requires $83,000 in pretax annual operating costs. Suppose the
company always needs a conveyor belt system; when one wears out, it
must be replaced. Assume the tax rate is 24 percent and the
discount rate is 11 percent. Calculate the...
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
$345,000, has a 4-year life, and requires $137,000 in pretax annual
operating costs. System B costs $425,000, has a 6-year life, and
requires $131,000 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...
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
$330,000, has a 4-year life, and requires $125,000 in pretax annual
operating costs. System B costs $410,000, has a 6-year life, and
requires $119,000 in pretax annual operating costs. Both systems
are to be depreciated straight-line to zero over their lives and
will have zero salvage value. Suppose the company always needs a
conveyor belt system; when one wears out, it must...
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
$365,000, has a 4-year life, and requires $153,000 in pretax annual
operating costs. System B costs $445,000, has a 6-year life, and
requires $147,000 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...
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
$330,000, has a 4-year life, and requires $125,000 in pretax annual
operating costs. System B costs $410,000, has a 6-year life, and
requires $119,000 in pretax annual operating costs. Suppose the
company always needs a conveyor belt system; when one wears out, it
must be replaced. Assume the tax rate is 23 percent and the
discount rate is 8 percent.
Calculate the...
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