Problem $6-16$ Comparing Mutually Exclusive Projects

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$.,32\mathrm{.}16.)$

Which conveyor belt system should the firm choose?

System A

System B