Question
In: Finance
Pags Industrial Systems Company (PISC) is trying to decide between two different conveyor belt systems. System...
Pags Industrial Systems Company (PISC) is trying to decide between two different conveyor belt systems. System A costs $405,000, has a three-year life, and requires $105,000 in pretax annual operating costs. System B costs $450,000, has a five-year life, and requires $60,000 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. If the tax rate is 34% and the discount rate is 20%, which project should the firm choose?
Please explain how to calculate the cash flows and NPV.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Pags Industrial Systems Company (PISC) is trying to decide between two different conveyor belt systems. System...
Pags Industrial Systems Company (PISC) is trying to decide
between two different conveyor belt systems. System A costs
$405,000, has a three-year life, and requires $105,000 in pretax
annual operating costs. System B costs $450,000, has a five-year
life, and requires $60,000 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. If the...
Letang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System...
Letang Industrial Systems Company (LISC) is trying to decide
between two different conveyor belt systems. System A costs
$335,000, has a four-year life, and requires $129,000 in pretax
annual operating costs. System B costs $415,000, has a six-year
life, and requires $123,000 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 9 percent.
Calculate the...
Lang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System...
Lang Industrial Systems Company (LISC) is trying to decide
between two different conveyor belt systems. System A costs
$204,000, has a four-year life, and requires $66,000 in pretax
annual operating costs. System B costs $288,000, has a six-year
life, and requires $60,000 in pretax annual operating costs.
Suppose LISC always needs a conveyor belt system; when one wears
out, it must be replaced. Assume the tax rate is 35 percent and the
discount rate is 10 percent.
Calculate the EAC...
Lang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System...
Lang Industrial Systems Company (LISC) is trying to decide
between two different conveyor belt systems. System A costs
$204,000, has a four-year life, and requires $66,000 in pretax
annual operating costs. System B costs $288,000, has a six-year
life, and requires $60,000 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...
Letang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System...
Letang Industrial Systems Company (LISC) is trying to decide
between two different conveyor belt systems. System A costs
$335,000, has a four-year life, and requires $129,000 in pretax
annual operating costs. System B costs $415,000, has a six-year
life, and requires $123,000 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 9 percent.
Calculate the...
Lang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System...
Lang Industrial Systems Company (LISC) is trying to decide
between two different conveyor belt systems. System A costs
$216,000, has a four-year life, and requires $69,000 in pretax
annual operating costs. System B costs $306,000, has a six-year
life, and requires $63,000 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
$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...
Lang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System...
Lang Industrial Systems Company (LISC) 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 pretax
annual operating costs. System B costs $375,000, has a six-year
life, and requires $74,000 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...
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