You are starting a family pizza parlor and need to buy a motorcycle for delivery orders. You have two models in mind. Model A costs $8,000 and is expected to run for 6 years: Model B is more expensive, with a price of $13,000, and has an expected life of 9 years. The annual maintenance costs are $760 for Model A and $600 for Model B. Assume that the opportunity cost of capital is 9 percent. Calculate equivalent annual costs (EAC) of each models. (Do not round the discount factor. Round intermediate calculations and final answers to 2 decimal places, e.g. 15.25.) EAC of Model A EAC of Model Bis $ You should buy $ Which one should you buy?
You are starting a family pizza parlor and need to buy a motorcycle for delivery orders. You have two models in mind. Model A costs $8,000 and is expected to run for 6 years: Model B is more expensive, with a price of $13,000, and has an expected life of 9 years. The annual maintenance costs are $760 for Model A and $600 for Model B. Assume that the opportunity cost of capital is 9 percent. Calculate equivalent annual costs (EAC) of each models. (Do not round the discount factor. Round intermediate calculations and final answers to 2 decimal places, e.g. 15.25.) EAC of Model A EAC of Model Bis $ You should buy $ Which one should you buy?
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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You are starting a family pizza parlor and need to buy a motorcycle for delivery orders. You have two models in mind. Model A costs
$8,000 and is expected to run for 6 years; Model B is more expensive, with a price of $13,000, and has an expected life of 9 years. The
annual maintenance costs are $760 for Model A and $600 for Model B. Assume that the opportunity cost of capital is 9 percent.
Calculate equivalent annual costs (EAC) of each models. (Do not round the discount factor. Round intermediate calculations and final
answers to 2 decimal places, eg. 15.25.)
EAC of Model Ai
EAC of Model B is
$
You should buy
$
Which one should you buy?
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