Listed below are twosolutions for a service issue. Work out the present costs fo

Question

Listed below are twosolutions for a service issue. Work out the present costs foroption 1 for a 4 year period of time. Use a 8 % interest rate
                       Option 1---------Option 2
First Cost-------15,000---------35,000
Maintenance--------1200yr---------900yr
Salvage-------------100------------2000
Life-------------2 years---------4 years Listed below are twosolutions for a service issue. Work out the present costs foroption 1 for a 4 year period of time. Use a 8 % interest rate
                       Option 1---------Option 2
First Cost-------15,000---------35,000
Maintenance--------1200yr---------900yr
Salvage-------------100------------2000
Life-------------2 years---------4 years

Explanation / Answer

Option 1 - Present cost Firstcost                       15,000 + maintenance 1,200 *3.312                   3,974                                      18,974 - salvage 2yr period 100 *0.857                         86                                      18,888

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