What is the break even interest rate

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Reference no: EM131374902

Ridgely Custom Meta l Products (RGMP) must purchase a new tube bender. It is considering two alternatives that have the following characteristics:

	Model T	Model A
First Cost	$ 100,000	$150,000
Economic Life	5 years	5 years
Yearly Savings	$ 50,000	$ 62,000
Salvage Value	$ 20,000	$ 30,000

Construct a break-even graph showing the present worth of each alternative as a function of interest rates between 6% and 20%.

Which is the preferred choice at 8% interest? Which is the preferred choice at 16% interest? What is the break-even interest rate?

Reference no: EM131374902

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