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Sagot :
Answer:
The lesser quality machine should be purchased because it has a lower equivalent annual cost of $15,075.60
Explanation:
The equivalent annual cost is the present value of the printer machine divided by the present value annuity factor.
Annuity factor for n years = 1- (1+r)^(-n)/r
Annuity factor for four years = (1- 1.14^-4)/0.14 =2.9137
Annuity factor for three years =(1- 1.14^-3)/0.14= 2.3216
Printer Equivalent annual cost of printer
High quality 45,000/2.9137 15,444.22
Lesser quality 35,000/2.3216 15,075.60
The lesser quality machine should be purchased because it has a lower equivalent annual cost of $15,075.60
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