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
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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
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