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 $6000. It should last for eight years and have annual maintenance cost of $300 per year. After eight years the magazine can
sell the camera for $300.
Camera 2 costs $5500. It will also last for eight years and have maintenance costs of $900 in year three $900 in year five and $1000 in
year seven. After eight years the camera will have no resale value. (FV of $1PV of $1FVA of $1 andPVA of $1) (Use
appropriate factor(s) from the tables provided. Round your answers to 2 decimal places.)
Assume that an interest rate of 9% 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.