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 $4,600. It should last for eight years and have annual maintenance costs of $280 per year. After eight years, the magazine can sell the camera for $260. Camera 2 costs $4,100. It will also last for eight years and have maintenance costs of $760 in year three, $900 in year five, and $1,000 in year seven. After eight years, the camera will have no resale value. (FV of $1, PV of $1, FVA 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 8% 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.       1-b. Which camera should Hollywood Tabloid purchase? multiple choice Camera 1 Camera 2

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
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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 $4,600. It should last for eight years and have annual maintenance costs of $280 per year. After eight years, the magazine can sell the camera for $260.


Camera 2 costs $4,100. It will also last for eight years and have maintenance costs of $760 in year three, $900 in year five, and $1,000 in year seven. After eight years, the camera will have no resale value. (FV of $1, PV of $1, FVA 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 8% 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.

 

 

 

1-b. Which camera should Hollywood Tabloid purchase?

multiple choice

  • Camera 1
  • Camera 2

 

 
 
 
 
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