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Which contract has the lowest net present cost

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- The city museum will have a Picasso exhibit on loan for 3 years. As part of the conditions of the loan, a specialized alarm & security system must be installed.

High Security Company will install a suitable system for $50,000 initial payment & $2,500/month in monitoring fees.

- Tight Security Company will install a suitable system for $75,000 initial payment & $1,675/month in monitoring fees. Both security systems would be used for 3 years.

Assuming an annual discount rate of 9% with monthly compounding, which contract has the lowest net present cost?

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The solution requires to calculate net present cost of 2 machines and recommend which one would be best and the same has been done perfectly.

Reference no: EM131018290

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