Tanaka Industrial Systems Company is trying to decide between two different conveyorbelt systems. System A costs $360,000, has a 4-year life, and requires $149,000 inpretax annual operating costs. System B costs $440,000, has a 6-year life, and requires$143,000 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 thecompany always needs a conveyor belt system; when one wears out, it must bereplaced. Assume the tax rate is 24 percent and the discount rate is 10percent. Calculate the EAC for both conveyor belt systems. (A negative answer shouldbe indicated by a minus sign. Do not round intermediate calculations and round youranswers to 2 decimal places, e.g., 32.16.)Answer is complete but not entirely correct.System A-650,486.43 XSystem B-836,677.14 X$$

EAC or equivalent annual cost is the annual cost of owning and maintaining the asset over its entire…

Answered: Tanaka Industrial Systems Company is…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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