New state-of-the-art camera to produce its monthly magazine

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Reference no: EM13885194

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 $4,000. 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 $200. Camera 2 costs $3,500. It will also last for eight years and have maintenance costs of $700 in year three, $900 in year five, and $1,000 in year seven. After eight years, the camera will have no resale value. (FV of $1, PV of $1, FVA of $1, and PVA of $1 Required: 1-a. Assume that an interest rate of 8% 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.

Reference no: EM13885194

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