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Conduct the analysis and offer a brief recommendation

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Reference no: EM131041460

Comparing mutually exclusive projects. Kingsmill industrial systems company (KISC) is trying to decide between different conveyor belt systems. System A costs $360,000, has a four year life, and requires $135,000 in pre-tax annual operating costs. System B costs $430,000, has a six-year life, and requires $98,000 in pre-tax annual operating costs. Both systems are to be depreciated at 30% per year (Class 10) and will have no salvage value. Whichever project is chosen, it will not be replaced when it wears out. If the tax rate is 34% and the discount rate is 12%, which project should the firm choose? Conduct the analysis and offer a brief recommendation.

Reference no: EM131041460

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