The provincial government's Ministry of Forest Resources requires a spotter plane for its fire service. The price of a Hawk is $240,000, and its annual operating costs will be $60,000. Given the heavy use it will receive, it will be sold for about $60,000 after five years and replaced. A more durable but less efficient Falcon, priced at $190,000, will cost $80,000 per year to operate, will last seven years, and will have a resale value of $80,000. If the provincial government pays an interest rate of 6.5% compounded annually on its midterm debt, which plane has the lower equivalent annual cost?

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The Answer of The provincial government's Ministry of Forest Resources requires a spotter plane for its fire service. The price of a Hawk is $240,000, and its annual operating costs will be $60,000. Given the heavy use it will receive, it will be sold for about $60,000 after five years and replaced. A more durable but less efficient Falcon, priced at $190,000, will cost $80,000 per year to operate, will last seven years, and will have a resale value of $80,000. If the provincial government pays an interest rate of 6.5% compounded annually on its midterm debt, which plane has the lower equivalent annual cost?

The Provincial Government's Ministry of Forest Resources Requires a Spotter