You are planning to purchase a range and have to make a choice among the following three models of the same type of equipment:

Using the concept of relevant costs over the five-year period, which model would be the best investment?LO1

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Model 1 Model 2 Model 3 Cash cost Estimate life $ 5,000 $ 5,500 $ 5,300 5 years 5 years 5 years Trade-in value at end of life Cash from sale of old machine $ 1,000 $ 1,200 $ 800 $ 200 $ 200 $ 200 Installation of new machine $ 80 $ 120 $ 100 Initial training cost in Year 1 $ 350 $ 300 $ 325 Annual maintenance contract $ 275 $ 300 $ 250 Annual cost of supplies $ 175 $ 225 $ 200 Annual wage costs of employees $32,000 $32,000 $32,000