Taser Company Has to Purchase Some New Equipment Required:
A

Taser Company has to purchase some new equipment. Two manufacturers have provided the following information:
$$\begin{array} { l r r } & \underline{\text { Equipment A }} & \underline{\text { Equipment B }} \\\text { Initial costs } & \$ 67,500 & \$ 90,000 \\\text { Estimated life } & 5 \text { years } & 5 \text { years } \\\text { Annual savings } & \$ 22,500 & \$ 24,000 \\\text { Discount rate } & 10.0 \% & 10.0 \%\end{array}$$ Required:
a. Determine the present value of annual savings for each piece of equipment, using a spreadsheet or financial calculator.
b. What is the payback for each piece of equipment? Show your calculations clearly.
c. Which investment is preferable? Why?