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Which model should Gold star choose

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Question - Gold star company is in need of Computers, they have narrowed the choices to IBM & DELL they would need 10 IBM Computers each one cost $3750 and requires $500 of maintenance each year. And Could be sold for $500 at the end of eight years (The life of the Computer). On the other hand, the Gold star could buy 8 Dell computers, each one costs $5250 and requires $700 maintenance every year this computer lasts six years and has a resale value of $600 for each one.

Which model should Gold star choose assuming that whichever model Gold star chooses will last forever Ignore tax effects and assume that maintenance cost occurs at year-end. Which model should they buy if the appropriate discount rate is 11%?

Reference no: EM133014907

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