Which investment provides the lowest total cost?

Business & Finance
Tutor: None Selected Time limit: 1 Day

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

Studypool's Notebank makes it easy to buy and sell old notes, study guides, reviews, etc.
Click to visit
The Notebank
...
Nov 10th, 2015
...
Nov 10th, 2015
Dec 4th, 2016
check_circle
Mark as Final Answer
check_circle
Unmark as Final Answer
check_circle
Final Answer

Secure Information

Content will be erased after question is completed.

check_circle
Final Answer