You are evaluating two different fishing boats for your seafood business. The Noah I costs $300,000, has
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Question:
You are evaluating two different fishing boats for your seafood business. The Noah I costs $300,000, has a three-year life, and has operating costs of $41,000 per year. The Noah II costs $400,000, has a five-year life, and has operating costs of $52,000 per year. For both boats, use straight-line depreciation to zero over the project's life and assume a salvage value of zero. Your tax rate is zero and your discount rate is 10 percent. Which boat do you prefer? Why?
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