Eads Industrial Systems Company (EISC)is Trying to Decide Between Two

question 46

Multiple Choice

Eads Industrial Systems Company (EISC) is trying to decide between two different conveyor belt systems.System A costs $427,000,has a 6-year life,and requires $115,000 in pretax annual operating costs.System B costs $502,000,has an 8-year life,and requires $79,000 in pretax 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 is 24 percent.Which system should the firm choose and why?

• A)A; The net present value is $211,516.
• B)A; The net present value is -$588,792.
• C)A; The net present value is -$314,216.
• D)B; The net present value is $308,222.
• E)B: The net present value is -$612,240.

Compute the present value of annuities with regular payments under given interest rates.

Estimate the term for ordinary annuities based on payment size, interest rates, and principal amounts.

Determine the monthly or periodic payment amount needed to repay loans or accumulate a specified amount over a fixed term.

Understand and apply the principles of compounding interest and its impact on saving and borrowing.

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Tetanus Toxoid

A vaccine used to provide immunity against tetanus, a bacterial infection.

Infectious Bite

A wound inflicted by an animal or human that introduces pathogens, potentially leading to infection or disease.