Which furnace should si choose-annual maintenance costs

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Reference no: EM13810471

Springfield Ironworks (SI) recently had their furnace break down and they need to quickly purchase a new one to minimize the disruption in their production. They can either choose a high quality furnace (H) that costs $130,000 with $4,000 of annual maintenance costs for the 7-year life of the furnace, or a low quality furnace (L) that costs $75,000 with $9,000 in annual maintenance costs for the 4-year life of the furnace. Which furnace should SI choose? What is the annualized cost of their choice? Assume a discount rate of 5.0%, and ignore all taxes.

Reference no: EM13810471

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