Problem $6-15$ Comparing Mutually Exclusive Projects

Rust Industrial Systems Company is trying to decide between two different conveyor belt

systems. System A costs $$315,000,$ has a $4-$year life, and requires $$113,000$ in pretax

annual operating costs. System B costs $$395,000,$ has a $6-$year life, and requires

$$107,000$ 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 $9$ percent. Calculate the NPV 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$.,32\mathrm{.}16.)$

Which conveyor belt system should the firm choose?

System B

System A