Question: Rust Industrial Systems Company is trying to decide between two different conveyor belt systems. System A costs 290,000, has a four-year life, and requires $80,000in
Rust Industrial Systems Company is trying to decide between two different conveyor belt systems. System A costs 290,000, has a four-year life, and requires $80,000in pretax annual operating costs. System B costs $375000 has a six-year life, and requires $74000 in pretax annual operating costs. Both systems are to be depreciated at 30% per year (class 10). Both systems can be sold as scrap at the end of their useful life. System A can be sold for 15% of its orginal cost while system can be sold for 10% of its orginal cost. The tax rate and the discount rate is 8% a. assume that whichever project is chosen, it will not be replaced when it wears out, decided which project should the firm choose? system a or system b calculate for both system Initial cost, after-tax annual operating cost, pv of after tax operating cost, pv cca tax shield, pv of salvage value and NPV replacement option calculate EAC System A EAC System B show your calculationn step by step and metion which should be chose if the company will replace and will not replace.
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