Determine using the present worth method

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Reference no: EM132032952

Two types of earth moving equipment which perform the same service are being considered for purchase. Type A has a first cost of $25000, an estimated life of 8 years, annual operating cost of $3000, and an estimate salvage value of $4000. Type B has a first cost of $35000, an estimated life of 12 years, annual operating cost of $3200, an estimated salvage value of $5500. In addition type B will require a major overhaul costing $ 5000 at the end of the sixth year. Using an interest rate of 12%, determine, using the present worth method, which type should be purchased.

Reference no: EM132032952

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