Tanaka Industrial Systems Company is trying to decide between two different conveyorbelt systems. System A costs $360,000, has a 4-year life, and requires $149,000 inpretax annual operating costs. System B costs $440,000, has a 6-year life, and requires$143,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Suppose thecompany always needs a conveyor belt system; when one wears out, it must bereplaced. Assume the tax rate is 24 percent and the discount rate is 10percent. Calculate the EAC for both conveyor belt systems. (A negative answer shouldbe indicated by a minus sign. Do not round intermediate calculations and round youranswers to 2 decimal places, e.g., 32.16.)Answer is complete but not entirely correct.System A-650,486.43 XSystem B-836,677.14 X$$

EAC or equivalent annual cost is the annual cost of owning and maintaining the asset over its entire…

Answered: Tanaka Industrial Systems Company is…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A food manufacturing company intends to make a new product. However, its present facilities are inadequate. On its present site, land is available for a new building which will cost P800,000, and the necessary equipment installed will cost P420,000. The building and equipment are expected to have a total salvage value of P360,000 at the end of 10yrs. The average annual income from the new product is expected to be P550,000 and the annual disbursements for materials, labor and all other expenses are estimated to be P310,000. If the company requires a minimum return of 12% from this product, using rate of return method, should it invest capital in the new product? Note: show the complete solution and not the excel type of solution
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please answer both questions fully.
Chadron Sports is considering adding a miniature golf course to its facility. The course would cost $138,000, would be depreciated on a straight-line basis over its five-year life, and would have a zero salvage value. The estimated income from the golfing fees would be $72,000 a year with $24,000 of that amount being variable cost. The fixed cost would be $11,600. In addition, the firm anticipates an additional $14,000 in revenue from its existing facilities if the golf course is added. The project will require $7,000 of net working capital, which is recoverable at the end of the project. What is the net present value of this project at a discount rate of 12 percent and a tax rate of 34 percent? O $14,438.78 $12,708.48 O $11,757.49 O $10,631.16 O $14,900.41
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An oil refinery finds that it is necessary to treat the waste liquids from a new process before discharging them into a stream. The treatment will cost $30,000 the first year, but process improvements will allow the costs alternative, an outside company will process the wastes for the fixed price of $15,000/year throughout the 15 year period, payable at the beginning of each year. Either way, there is no need to treat the wastes after 15 years. Use the annual worth method to determine how the wastes should be processed. The company's MARR is 12%. decline by $3,000 each year. As an Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year. The AW of the in-house treatment is S (Round to the nearest dollar) The AW of the outside treatment is S (Round to the nearest dollar.) The processing is the most economical alternative
4. What is correct answer?

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