Question: Cois trying to decide between 2 different belt systems. System A costs $360,000, has a 4-year life, and requires $149,000 in pretax annual operating costs.
Cois trying to decide between 2 different belt systems. System A costs $360,000, has a 4-year life, and requires $149,000 in pretax annual operating costs. System B costs $440,000, has a 6-year life, and requires $143,000 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 companyalways 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 10 percent.Calculate the EAC for both belt systems and note which belt system should be chosen
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