38. A farmer is considering two different tractors for his business. Each tractor has a different price but also a different life span. The farmer will have to replace either tractor at the end of its useful life and start again. We will assume that the farmer has a discount rate of 9.00%. MODEL A: Initial cost of $14,978.00, Yearly operating cost of $972.00 for 7.00 years. MODEL B: Initial cost of $12,099.00, Yearly operating cost of $1,574.00 for 10.00 years. What is the NPV of buying tractor A?

39.

A farmer is considering two different tractors for his business. Each tractor has a different price but also a different life span. The farmer will have to replace either tractor at the end of its useful life and start again. We will assume that the farmer has a discount rate of 9.00%.

MODEL A: Initial cost of $14,978.00, Yearly operating cost of $972.00 for 7.00 years.

MODEL B: Initial cost of $12,099.00, Yearly operating cost of $1,574.00 for 10.00 years.

What is the NPV of buying project B? (HINT: The NPV will be negative)