Describe the cash flow diagram

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Reference no: EM131466125

Question: Two systems are being considered for the same task. System 1 costs $63 000 new and is estimated to last four years. It will then have a salvage or trade-in value of $4 500. The cost to replace system 1 will be 3.5% more each year than it was the year before. lt will cost $4 200 per year to operate and maintain system 1, payable at the end of each year. System 2 costs $120 000 to buy and will last eight years. l't will have a salvage or trade-in value of $6 000. The cost to operate and maintain system 2 will be $2 400 per year, payable at the end of each year. Assume the task will be performed for eight years. Compare the two systems, state your basis of comparison, and include a cash-flow diagram. All interest rates are 7.0% per year unless otherwise stated.

Reference no: EM131466125

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