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Kingsmill Industrial Systems Company (KISC) is trying to decide between two different conveyor belt systems. System...

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Finance

Kingsmill Industrial Systems Company (KISC) is trying to decidebetween two different conveyor belt systems. System A costs$290,000, has a four-year life, and requires $80,000 in pre-taxannual operating costs. System B costs $375,000, has a six-yearlife, and requires $74,000 in pre-tax annual operating costs. Bothsystems are to be depreciated at 30 percent per year (Class 10) andwill have no salvage value. Whichever project is chosen, it willnot be replaced when it wears out. If the tax rate is 34percent and the discount rate is 8 percent, which project shouldthe firm choose?

Select one:

a. System A

b. System B

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