Lang Industrial Systems Company (LISC) is trying to decide
between two different conveyor belt systems. System A costs
$228,000, has a fouryear life, and requires $72,000 in pretax
annual operating costs. System B costs $324,000, has a sixyear
life, and requires $66,000 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 35 percent and the
discount rate is 10 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.)


EAC 
System A 
$ 
System B 
$ 

Which conveyor belt system
should the firm choose? 


Fill in the missing numbers for the following income statement.
(Input all amounts as positive values. Do not round
intermediate calculations.)


Sales 
$ 
677,900 

Costs 

432,800 

Depreciation 

105,400 





EBIT 
$ 


Taxes (34%) 







Net income 
$ 







What is the depreciation tax
shield? 
Depreciation tax
shield 
$ 
You are evaluating two different silicon wafer milling machines.
The Techron I costs $258,000, has a threeyear life, and has pretax
operating costs of $69,000 per year. The Techron II costs $450,000,
has a fiveyear life, and has pretax operating costs of $42,000 per
year. For both milling machines, use straightline depreciation to
zero over the projectâ€™s life and assume a salvage value of $46,000.
If your tax rate is 35 percent and your discount rate is 9 percent,
compute the EAC for both machines. (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.)


EAC 
Techron I 
$ 
Techron II 
$ 

Which machine do you
prefer? 


