Lang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems.
System A costs $212,000. has a four-year life, and requires $68,000 in pretax annual operating costs? System B costs $300,000. has a six-year life, and requires $62,000 in pretax annual operating costs. Suppose LISC always needs a conveyor belt system; when one wears out, it must be replaced.
Assume the tax rate is 30 percent and the discount rate is 9 percent.
Calculate the EAC for both conveyor belt systems (Negative amounts should be indicated by a minus sign. Do not round Intermediate calculations and round your answers to 2 decimal places, (e.g., 32.16))
Which conveyor belt system should the firm choose? System A System B