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Calculate the EAC for both conveyor belt systems

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Reference no: EM133041327

Problem - Hagar Industrial Systems Company (HISC) is trying to decide between two different conveyor belt systems. System A costs $350,000, has a 4-year life, and requires $141,000 in pretax annual operating costs. System B costs $430,000, has a 6-year life, and requires $135,000 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 22 percent and the discount rate is 8 percent. Calculate the EAC for both conveyor belt systems.

Reference no: EM133041327

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