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Acadian Life Care (ALC) requires a new client transport vehicle (bus). It is considering two options: (1) buy a bus for $85,000 with monthly servicing
Acadian Life Care (ALC) requires a new client transport vehicle (bus). It is considering two options: (1) buy a bus for $85,000 with monthly servicing costs of $100 and resell the bus for $47,000 after 7 years, or (2) pay a contractor $1,300 at the end of each month for 7 years, to provide a vehicle. ALC evaluates investments based upon net present value analysis. At 12% APR (annual interest rate) compounded monthly, which is the better option?
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