You must choose between four pieces of comparable equipment based on the cash flows below. All four have a life of 8 years. Parameter First cost $25,000 $35,000 $20,000 $40,000 Annual costs $8,000 $6,000 $9,000 $5,000 Salvage value $2,500 $3,500 $2,000 $4,000
The discount rate is 12%. Ignore taxes.
What are the two most preferable pieces of equipment?
What is the approximate difference between their present worth values?
A and C, $234
B and D, $170
A and C, $170
B and D, $234