50.1K

Verified Solution

Link Copied!

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 $4,600. 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 $260. Camera 2 costs $4,100. It will also last for eight years and have maintenance costs of $760 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, FVA 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 8% 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?

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 $4,600. 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 $260. Camera 2 costs $4,100. It will also last for eight years and have maintenance costs of $760 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,FVA 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 8% 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? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Assume that an interest rate of 8% 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

Answer & Explanation Solved by verified expert

See Answer