Hollywood Tabloid needs a new state-of-the-art camera to produce its monthly magazine. The company is looking at two cameras that are both capable of doing the job and has determined the following: Camera 1 costs $5,700. It should last for eight years and have annual maintenance costs of $240 per year. After eight years, the magazine can sell the camera for $330 Camera 2 costs $5,200. It will also last for eight years and have maintenance costs of $870 in year three, $900 in year five, and $1,000 in year seven. After eight years, the camera will have no resale value. (EV of $1. PV of $1. EVA of $1. and PVA of S1) (Use appropriate factor(s) from the tables provided. Round your answers to 2 decimal places.) Required: 1-a. Assume that an interest rate of 10% properly reflects the discount rate in this situation and that maintenance costs are paid at the end of each year. Determine the total cost of cameras.
Hollywood Tabloid needs a new state-of-the-art camera to produce its monthly magazine. The company is looking at two cameras that are both capable of doing the job and has determined the following: Camera 1 costs $5,700. It should last for eight years and have annual maintenance costs of $240 per year. After eight years, the magazine can sell the camera for $330 Camera 2 costs $5,200. It will also last for eight years and have maintenance costs of $870 in year three, $900 in year five, and $1,000 in year seven. After eight years, the camera will have no resale value. (EV of $1. PV of $1. EVA of $1. and PVA of S1) (Use appropriate factor(s) from the tables provided. Round your answers to 2 decimal places.) Required: 1-a. Assume that an interest rate of 10% properly reflects the discount rate in this situation and that maintenance costs are paid at the end of each year. Determine the total cost of cameras.
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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Transcribed Image Text:Hollywood Tabloid needs a new state-of-the-art camera to produce its monthly magazine. The company is looking at two cameras that
are both capable of doing the job and has determined the following
Camera 1 costs $5,700. It should last for eight years and have annual maintenance costs of $240 per year. After eight years, the
magazine can sell the camera for $330
Camera 2 costs $5,200. It will also last for eight years and have maintenance costs of $870 in year three, $900 in year five, and
$1,000 in year seven. After eight years, the camera will have no resale value. (EV of $1. PV of $1. EVA of $1. and PVA of $1) (Use
appropriate factor(s) from the tables provided. Round your answers to 2 decimal places.)
Required:
1-a. Assume that an interest rate of 10% properly reflects the discount rate in this situation and that maintenance costs are paid at the
end of each year. Determine the total cost of cameras.
Camera 1
Camera 2
Total Cost
1-b. Which camera should Hollywood Tabloid purchase?
O Camera 2
O Camera 1
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