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You are starting a family pizza parlor and need to buy a motorcycle for delivery orders. You have two models in mind. Model A costs $9,300 and is expected to run for 6 years; model B is more expensive, with a price of $15,800 and has an expected life of 9 years. The annual maintenance costs are $810 for model A and $740 for model B. Assume that the opportunity cost of capital is 9 percent. Calculate EAC for both the models and choose which one should you buy?
Since EAC is lower for Model A/Model B?, you should buy Model A/Model B?.
Please show all of your steps. I'm having issues working the formula to produce the correct answer. I found the correct answer in the practice problems but am unsure of how to get to this answer.
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