Question
5-32. The city museum will have a Picasso exhibit on loan for 3 years. As part of the conditions of the loan, a specialized alarm
5-32. The city museum will have a Picasso exhibit on loan for 3 years. As part of the conditions of the loan, a specialized alarm and security system must be installed. High Security Company will install a suitable system for a $50,000 initial payment and $2,500 per month in monitoring fees. Tight Security Company will install a suitable system for a $75,000 initial payment and $1,675 per month in monitoring fees. Both security systems would be used for 3 years. Assuming an annual discount rate of 9 percent with monthly compounding, which contract has the lowest net present cost?
PROBLEM 5-32 SOLUTION
(Annualized Cost)
INPUT DATA Model A Model B Initial
Outflow
PMT
nper
rate
=PV(rate,nper,pmt,fv,type)
PV of Operating Costs $- $-
Acquisition Cost $- $-
Net Present Cost $- $-
=PMT(rate,nper,PV,fv,type)
Annualized Cost #NUM! #NUM!
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