Which investment provides the lowest total cost?

label Business & Finance
account_circle Unassigned
schedule 1 Day
account_balance_wallet $5

A freezer must be replaced, how do I decide between the following two alternatives:  Investment required $29,000 or $25,000    Annual electrical bill $3,000 or $4,000   Salvage value $6,000 or $5,000  Project life in years 11 and 11

Nov 10th, 2015

Thank you for the opportunity to help you with your question!

compare the PV of total investment

Need to know the annual interest rate   

PV1 = -29000-3000*(the present value of 1 at interest rate i for 11 years)+6000/ (1+i)^11

PV2 = -25000-4000*(the present value of 1 at interest rate i for 11 years)+5000/(1+i)^11

if PV2>PV1 then choose 1

Please let me know if you need any clarification. I'm always happy to answer your questions.
Nov 10th, 2015

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Nov 10th, 2015
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