Contemporary Engineering Economics 6th Edition by Chan Park

Exercise 43

An industrial firm can purchase a special machine for $70,000. A down payment of $5,000 is required, and the unpaid balance can be paid off in five equal year-end installments at 9% interest. As an alternative, the machine can be purchased for $66,000 in cash. If the firm's MARR, is 10%, use the annual equivalent method to determine which alternative should be accepted.