Question: Please help solve! Thanks! Problem 10.22 You are starting a family pizza parlor and need to buy a motorcycle for delivery orders. You have two
Please help solve! Thanks!
Problem 10.22 You are starting a family pizza parlor and need to buy a motorcycle for delivery orders. You have two models in mind. Model A costs $9,500 and is expected to run for 6 years; model B is more expensive, with a price of $16,000 and has an expected life of 10 years. The annual maintenance costs are $850 for model A and $730 for model B. Assume that the opportunity cost of capital is 11 percent. Calculate EAC for both the models and choose which one should you buy?(Round intermediate calculations and final answers to 2 decimal places, e.g. 15.25.)| The EAC of Model A is | $ |
| The EAC of Model B is | $ |
| Since EAC is lower for Model AModel B, you should buy Model AModel B. |
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