Question

# Lang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System...

 Lang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs \$216,000, has a four-year life, and requires \$69,000 in pretax annual operating costs. System B costs \$306,000, has a six-year life, and requires \$63,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Whichever project is chosen, it will not be replaced when it wears out. The tax rate is 35 percent and the discount rate is 10 percent.
 Calculate the NPV 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.)
 NPV System A \$ System B \$
Which conveyor belt system should the firm choose?
 System B System A
 Lang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs \$228,000, has a four-year life, and requires \$72,000 in pretax annual operating costs. System B costs \$324,000, has a six-year 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?
 System A System B
 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 \$
 Calculate the OCF.
 OCF \$
 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 three-year life, and has pretax operating costs of \$69,000 per year. The Techron II costs \$450,000, has a five-year life, and has pretax operating costs of \$42,000 per year. For both milling machines, use straight-line 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?
 Techron II Techron I