#38

A farmer is considering two different tractors for his business. Each tractor has a different price but also a different life span. The farmer will have to replace either tractor at the end of its useful life and start again. We will assume that the farmer has a discount rate of 9.00%.

MODEL A: Initial cost of $14,916.00, Yearly operating cost of $941.00 for 7.00 years.

MODEL B: Initial cost of $12,632.00, Yearly operating cost of $1,540.00 for 10.00 years.

Which tractor has the lower annual cost? (A or B)

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