Description of this paper

CBOE Manfacturing is trying to decide between two...

Description

Solution


Question

CBOE Manfacturing is trying to decide between two different conveyor belt systems. System A costs $413,000 has a 6-year life, and requires $116,000 in pretax annual operating costs. System B costs $531,000 has a 9-year life, and requires $89,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have 0 salvage value. Whichever project is chosen, it will not be replaced when it wears out. If the tax rate is 32% and the discount rate is 18%, the NPV for project A is ? and the NPV for project B is?

 

Paper#5716 | Written in 18-Jul-2015

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