You are starting a family pizza parlor and need to buy a motorcycle for delivery orders. You have two models in mind.
Model A costs $9,400 and is expected to run for 6 years; model B is more expensive, with a price of $15,200 and has an expected life of 10 years.
The annual maintenance costs are $800 for model A and $740 for model B.
Assume that the opportunity cost of capital is 10 percent. Calculate EAC for both the models and choose which one should you buy.