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NPV Calculations 5% Bob wants to open a hot dog stand and plans to operate it for 6 years. He has spoken with different manufacturers
NPV Calculations 5% Bob wants to open a hot dog stand and plans to operate it for 6 years. He has spoken with different manufacturers to purchase a hot dog stand and has shortlisted two manufacturers. Manufacturer A asks him to pay $160,000 up front. Manufacturer B asks him to pay $50000 as a down payment for the hot dog stand and $1800 a month for the next 6 years at the end of each month. After 6 years, Manufacturer B will buy the hot dog stand back from him for $5000 (salvage value). Assume a yearly interest rate of 8%. Should Bob go with Manufacturer A or should he go with Manufacturer B? Use net present value analysis to see which manufacturer is cheaper and show your work
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