Question

CBOE Manufacturing is trying to decide between two different conveyor belt systems. System A costs $457,000, has a 4-year life, and requires $117,000 in pretax annualoperating costs. System B costs $532,000, has a 7-year life, and requires $64,000 in pretax annual operating costs. Both systems are to be depreciated straight-line tozero over their lives and will have zero salvage value. Whichever project is chosen, it will not be replaced when it wears out. If the tax rate is 32 percent and thediscount rate is 21 percent, the NPV for project A is $ and the NPV for project B is $

Answer 1

thus, NPV of project A is $222890.09 and of Project B is $126419.76 as solved. the solution is attached below in the image