Least-Cost Decisions
Response to the following problem:
The company is required to install a new piece of safety equipment. The company has two alternatives for the equipment. One alternative would cost $260,000 immediately but would not add to operating costs over the 5-year life of the equipment. The second alternative costs $75,000 immediately but would add $45,000 to annual operating costs for five years. The company uses an 8% discount rate. Which alternative should the company purchase?