Answer to Question #176049 in Finance for Jacquelynn Newton

Question

Equipment A costs 400 and has operating costs of 400 per year. Equipment B has a cost of 340 and annual costs of 120. At what interest rate are you indifferent in cost if both will last 3 years.

Answer 1

At any interest rate the total cost of equipment A is higher than of equipment B if both will last 3 years. So, the equipment B is cheaper.