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cloveb cloveb
wrote...
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Posts: 763
4 years ago
You are considering the purchase of new equipment for your company and you havenarrowed down the possibilities to two models which perform equally well. However, themethod of paying for the two models is different. Model A requires $5,000 per year paymentfor the next five years. Model B requires the following payment schedule. Which model shouldyou buy if your opportunity cost is 8 percent?

Year             Payment (Model B)
1                  $7,000
2                  $6,000
3                  $5,000
4                  $4,000
5                  $3,000
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bolbolbolbol
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Posts: 2362
4 years ago
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Model A: PV=PMT (PVIFA)=5,000 (3.993)=$19,965
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