Hollywood Tabloid needs a new state-of-the-art camera to produce its monthly magazine. The company is looking at two cameras that are both capable of doing the job and has determined the following: Camera 1 costs $5,400. It should last for eight years and have annual maintenance costs of $280 per year. After eight years, the magazine can sell the camera for $360. Camera 2 costs $4,900. It will also last for eight years and have maintenance costs of $840 in year three, $900 in year five, and $1,000 in year seven. After eight years, the camera will have no resale value. (FV of $1. PV of $1. EVA of $1, and PVA of $1) (Use tables, Excel, or a financial calculator. Round your answers to 2 decimal places.) Required: 1-a. Assume that an interest rate of 10% properly reflects the discount rate in this situation and that maintenance costs are paid at the end of each year. Determine the total cost of cameras. 1-b. Which camera should Hollywood Tabloid purchase? Complete this question by entering your answers in the tabs below. Req 1A Reg 18 Assume that an interest rate of 10% properly reflects the discount rate in this situation and that maintenance costs are paid at the end of each year. Determine the total cost of cameras. Camera 1 Camera 2 Total Cost Rag 1A Req 18 >
Hollywood Tabloid needs a new state-of-the-art camera to produce its monthly magazine. The company is looking at two cameras that are both capable of doing the job and has determined the following: Camera 1 costs $5,400. It should last for eight years and have annual maintenance costs of $280 per year. After eight years, the magazine can sell the camera for $360. Camera 2 costs $4,900. It will also last for eight years and have maintenance costs of $840 in year three, $900 in year five, and $1,000 in year seven. After eight years, the camera will have no resale value. (FV of $1. PV of $1. EVA of $1, and PVA of $1) (Use tables, Excel, or a financial calculator. Round your answers to 2 decimal places.) Required: 1-a. Assume that an interest rate of 10% properly reflects the discount rate in this situation and that maintenance costs are paid at the end of each year. Determine the total cost of cameras. 1-b. Which camera should Hollywood Tabloid purchase? Complete this question by entering your answers in the tabs below. Req 1A Reg 18 Assume that an interest rate of 10% properly reflects the discount rate in this situation and that maintenance costs are paid at the end of each year. Determine the total cost of cameras. Camera 1 Camera 2 Total Cost Rag 1A Req 18 >
Chapter11: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 1nM
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Transcribed Image Text:Hollywood Tabloid needs a new state-of-the-art camera to produce its monthly magazine. The company is looking at two cameras that
are both capable of doing the job and has determined the following:
Camera 1 costs $5,400. It should last for eight years and have annual maintenance costs of $280 per year. After eight years, the
magazine can sell the camera for $360.
Camera 2 costs $4,900. It will also last for eight years and have maintenance costs of $840 in year three, $900 in year five, and
$1,000 in year seven. After eight years, the camera will have no resale value. (FV of $1. PV of $1. EVA of $1, and PVA of $1) (Use tables,
Excel, or a financial calculator. Round your answers to 2 decimal places.)
Required:
1-a. Assume that an interest rate of 10% properly reflects the discount rate in this situation and that maintenance costs are paid at the
end of each year. Determine the total cost of cameras.
1-b. Which camera should Hollywood Tabloid purchase?
Complete this question by entering your answers in the tabs below.
Req 1A
Reg 18
Assume that an interest rate of 10% properly reflects the discount rate in this situation and that maintenance costs are paid
at the end of each year. Determine the total cost of cameras.
Total Cost
Camera 1
Camera 2
Rag 1A
Req 18 >
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