Hagar Industrial Systems Company

Hagar Industrial Systems Company

Q5.Hagar Industrial Systems Company (HISC) is trying to decide between two different conveyor belt
systems. System A costs $224,000, has a four-year life, and requires $71,000 in pretax annual operating
costs. System B costs $318,000, has a six-year life, and requires $65,000 in pretax annual operating
costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage
value. Whichever system is chosen, it will not be replaced when it wears out. The tax rate is 30 percent
and the discount rate is 9 percent.
Calculate the NPV for both conveyor belt systems. (Do not round intermediate calculations
and round your answer to 2 decimal places. (e.g., 32.16). Negative amounts should be indicated
by a minus sign.)
NPV
System A
System B

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