Question

Springfield ironworks (si) recently had their furnace break down and they need to quickly purchase a new one to minimize the disruption in their production. They can either choose a high quality furnace (h) that costs $105,000 with $2,500 of annual maintenance costs for the 7-year life of the furnace, or a low quality furnace (l) that costs $50,000 with $6,500 in annual maintenance costs for the 4-year life of the furnace. Which furnace should si choose? What is the annualized cost of their choice? Assume a discount rate of 7.0%, and ignore all taxes.

Answer 1

I don't know about business studies