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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b. Mui Pasan Bhd is trying to decide between two different climbing conveyor systems. System A costs RM427,000, has a 6-year life, and requires RM112,000 in pre-tax annual operating costs. System B costs RM517,000, has an 8-year life, and requires RM79,000 in pre-tax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have a zero-salvage value. Whichever system is chosen, it will not be replaced when it wears out. The tax rate is 33 percent and the discount rate are 24 percent. Required: Which system should the firm choose and why
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