Which model would recommend to purchase and why

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LLL is a company that sells modern equipment. To purchase a new equipment for your company from LLL, you as a financial manager have narrowed down two equipment models which meet your performance requirements equally. However, the schedule of payments of two models are different.

Model A requires yearly payment of $15,000 for 5 years with the first payment to be made today.

Model B requires yearly payment of $15,500 for 5 years with the first payment to be made end of year 1.

Problem 1: Given yearly interest rate of 5.5%, which model would you recommend to purchase and why?

Reference no: EM132843702

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