Tanaka Industrial Systems Company is trying to decide between two different conveyor belt systems. System A...
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Tanaka Industrial Systems Company 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. Suppose the company always needs a conveyor belt system; when one wears out, it must be replaced. Assume the tax rate is 25 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., 32.16.) System A System B Which conveyor belt system should the firm choose? System A System B Tanaka Industrial Systems Company 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. Suppose the company always needs a conveyor belt system; when one wears out, it must be replaced. Assume the tax rate is 25 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., 32.16.) System A System B Which conveyor belt system should the firm choose? System A System B
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