Miller & McJunkin Photography studio needs a new camera. They have narrowed the choice down to two options:

Camera	Lynch, Inc.s Model SB200	Ibrahim Photographic Model RK6
Purchase cost	$6,000	5,500
Maintenance cost	$300/year for 7 years (at the end of each year)	$0 for years 1-4 $2,500 in year 5 $0 thereafter

Miller & McJunkins normal borrowing rate is 9% (a rate they would use to do time value calculations).

Potentially useful formulas for time value of money situations:

Present value of an annuity =

Present value of a single amount =

where P is the amount of the periodic cash flow, i is the rate per period used to discount the cash flows, nis the number of periods, and FV is the amount of a future cash flow.

Which camera is the lower-cost option? (Hint: since some of the cash payments that will be made happen at different time, we need to use time value tools to compute the value as of the time of the decision (present value).