You are evaluating two different systems: System A costs $45,000, has a three year life and costs $5,000 per year to operate. System B costs $65,000, has a five year life and costs $4,000 per year to operate. If the required rate of return is 8%, which system would you prefer?

You are evaluating two different systems: System A costs $45,000, has a three year life and costs $5,000 per year to operate. System B costs $65,000, has a five year life and costs $4,000 per year to operate. If the required rate of return is 8%, which system would you prefer?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

You are evaluating two different systems:
System A costs $45,000, has a three year
life and costs $5,000 per year to operate.
System B costs $65,000, has a five year life
and costs $4,000 per year to operate.
If the required rate of return is 8%, which
system would you prefer?
I
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