Drago distribution handles the warehousing of perishable

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Drago Distribution handles the warehousing of perishable foods and is considering replacing one of its primary cold storage units. One supplier has offered a unit for $250,000 with an expected life of 10 years. The unit is projected to reduce electricity costs by $50,000 per year. However, it requires a $20,000 refurbishing every 2 years, beginning 2 years after the purchase. Another supplier has offered similar capabilities for $300,000 and it will produce same savings and results but requires refurbishing every 5 years at a cost of $40,000. Their cost of capital is 8.5 %. Use NPV to determine which cold storage unit they should buy?

Reference no: EM13570602

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