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Grace is purchasing a walk-in freezer for her restaurant. Model A has a purchase price of $38,000 and is expected to last for 15 years. Model B has a purchase price of $29,500 and is expected to last for 12 years. Both models have residual values of zero, and there are no differences in operating costs between the two alternatives. a) If the Grace’s cost of capital is 9% compounded annually, which equipment alternative has the lower equivalent annual cost (EAC)?

Grace is purchasing a walk-in freezer for her restaurant. Model A has a purchase price of $38,000 and is expected to last for 15 years. Model B has a purchase price of $29,500 and is expected to last for 12 years. Both models have residual values of zero, and there are no differences in operating costs between the two alternatives. a) If the Grace’s cost of capital is 9% compounded annually, which equipment alternative has the lower equivalent annual cost (EAC)?

Intermediate Algebra
Intermediate Algebra
10th Edition
ISBN:9781285195728
Author:Jerome E. Kaufmann, Karen L. Schwitters
Publisher:Jerome E. Kaufmann, Karen L. Schwitters
Chapter11: Exponential And Logarithmic Functions
Section11.2: Applications Of Exponential Functions
Problem 27PS
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Grace is purchasing a walk-in freezer for her restaurant. Model A has a purchase price of $38,000 and is expected to last for 15 years. Model B has a purchase price of $29,500 and is expected to last for 12 years. Both models have residual values of zero, and there are no differences in operating costs between the two alternatives.

a) If the Grace’s cost of capital is 9% compounded annually, which equipment alternative has the lower equivalent annual cost (EAC)?

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