Hollywood Tabloid needs a new state-of-the-art camera to produce its monthly magazine. The company is looking at two cameras that are both capable of doing the job and has determined the following:Camera 1 costs $6,000. It should last for eight years and have annual maintenance cost of $300 per year. After eight years, the magazine can sell the camera for $300.
Camera 2 costs $5,500. It will also last for eight years and have maintenance costs of $900 in year three, $900 in year five, and $1,000 in year seven. After eight years, the camera will have no resale value.
Required:
Assume that an interest rate of 9% properly reflects the discount rate in this situation and that maintenance costs are paid at the end of each year. Determine the total cost of cameras.
Image text transcribed for accessibility Assume that an interest rate of 9% properly reflects the discount rate in this situation and that maintenance costs are paid at the end of each year. Determine the total cost of cameras.