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Calculate equivalent annual costs of each models

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Question - 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 $10,000 and is expected to run for 7 years; Model B is more expensive, with a price of $13,500, and has an expected life of 9 years. The annual maintenance costs are $880 for Model A and $640 for Model B. Assume that the opportunity cost of capital is 12 percent. Calculate equivalent annual costs (EAC) of each models.

Reference no: EM132861154

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