Using a.) Present Worth analyses and b.) Equivalent annual worth analyses, decide which of two hydraulic systems you would recommend for purchase.
The first hydraulic system, A, requires annual operating, maintenance and repair cost of $1000 and it has a useful life of 15 years. Its initial cost is $35,000 and it has a salvage value of $6000 at the end of its useful life.
The second hydraulic system, B, has an initial cost of $18,000 and is expected to be unserviceable after ten years. It requires $500 annual operating, maintenance and repair cost and has a zero salvage value after its 10-year useful life.
Which would you recommend for purchase if you had to purchase one of these hydraulic systems? Assume the interest rate is 6%