Two manufacturers supply MRI systems for medical imaging

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Two manufacturers supply MRI systems for medical imaging. St. Jude’s Hospital wishes to replace its current MRI equipment that was purchased 8 years ago with the newer technology and clarity of a state of - the - art system. System K will have a first cost of $1,600,000, an operating cost of $70,000 per year, and a salvage value of $400,000 after its 4 - year life. System L will have a first cost of $2,100,000, an operating cost of $50,000 the first year with an expected increase of $3000 per year thereafter, and no salvage value after its 8 - year life. Which system should be selected on the basis of a future worth analysis at an interest rate of 12% per year?

Reference no: EM13887808

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