1. A company plans to install a labour saving equipment, and it has a choice of...

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1. A company plans to install a labour saving equipment, and it has a choice of two models A and B. Each model is expected to last four years and to be worthless at the end of its life. The cost data associated with each model are recorded in the table below and the models are alike in all other respects. If this firm earns 12.6 % per annum, which model is more economical and discuss your results? [10] Item Initial Cost, $ Estimated Annual Costs, $ Year 1 Year 2 Year 3 Year 4 Model A 80,000 7,000 8,000 9,100 9,500 Model B 65,000 8,100 8,700 10,200 11,300 1. A company plans to install a labour saving equipment, and it has a choice of two models A and B. Each model is expected to last four years and to be worthless at the end of its life. The cost data associated with each model are recorded in the table below and the models are alike in all other respects. If this firm earns 12.6 % per annum, which model is more economical and discuss your results? [10] Item Initial Cost, $ Estimated Annual Costs, $ Year 1 Year 2 Year 3 Year 4 Model A 80,000 7,000 8,000 9,100 9,500 Model B 65,000 8,100 8,700 10,200 11,300

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