Calcuate the present value of each of the items specified

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Reference no: EM13253047

A. Two machinery options are described below. Calcuate the present value of each of the items specified. Assume an interest rate of 6% and a useful life of 8 years. Show all the necesary work to calcualte value.

Option1 = The inital purchase proce of the machine $25000. The salvage value at the end of the useful life will be $5000. Maintenance cost are $2000 first year and increase 0 per year.

Option 2 The machine is leased for an initial payment of $2000 plus annual payments of $3500. There is no savage vakue. A maintenca contract is purchase for a single payment of $10000 at the start of the lease period.

B. What is the equivalent annualized total cost,over the 8 years lifetime, for the machibe with the lowest present value of lifecycle cost.

Reference no: EM13253047

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