Peabody Transport Service is considering the purchase of a helicopter for connecting services between its base airport and the new inter county airport being built about 30 miles away. It is believed that the helicopter will be needed only for six years until the rapid transit connection is phased in. The estimates on two types of helicopters under consideration, Model A and Model B, are given:

Assuming that the Model A will be available in the future, with identical costs, what is the annual cost advantage of selecting the Model B? (Use an interest rate of 10%.)

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Model A Model B $95,000 $120,000 First Cost $3,000 $9,000 Annual Maintenance Salvage Value Useful life in years $12,000 $25,000 3 6.