[ceverman]

Hagar Industrial Systems Company (HISC) is trying to decide between two different conveyor belt systems. System A costs $290,000, has a four-year life, and requires $85,000 in pretax annual operating costs. System B costs $405,000, has a six-year life, and requires $75,000 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 34 percent and the discount rate is 11 percent.
Calculate the NPV for both conveyor belt systems.
Here are my calculations (though you can't see the formula)
Present value of the cost of the machine
Particulars	System A	System B
Cost of System	290000	405000
Pretax Annual OC	85000	75000
Salvage Value	0	0
Tax Rate	34%	34%
Discount rate	11%	11%
Life of system	4 years	6 years
	System A	System B
Depreciation	72500	67500
Tax shield	24650	22950
	System A
Net cash flow System	Year 0	Year 1- 4
Initial out flow	290000	0
Operating Cost	0	85000
(-) tax shield on OC	0	-28900
(-) tax shield on depreciation	0	-24650
(-) salvage value	0	0
Net Cash flow (out flow)	290000	31450
Present Value of System A
	System B
Net cash flow System	Year 0	Year 1- 4
Initial out flow	405000	0
Operating Cost	0	75000
(-) tax shield on OC	0	-25500
(-) tax shield on depreciation	0	-22950
(-) salvage value	0	0
Net Cash flow (out flow)	405000	26550
Present Value of System A	290000
	28333.33333
	25525.52553
	22995.96894
	20717.08914
	$ 387,571.92
Present Value of System B	405000
	23918.91892
	21548.5756
	19413.13117
	17489.30736
	15756.13276
	14194.7142
	$ 517,320.78
Calculation of EAC	$ 124,926.48
Calculation of EAC	$ 122,283.60