PROBLEM 5-30
(Annualized Cost)
INPUT DATA	French Corp	Japan Rail Car
Initial Outflow
PMT
Useful Life - nper
rate
CALCULATION
PV of Operating Costs
Acquisition Cost
Net Present Cost	$-	$-
Useful lives -nper
Annualized Cost

5-30. The City Transit Authority (CTA) is trying to decide between railcars manufactured by French Corp and Japan Rail Car. The French Corp cars cost more to buy initially, but they are expected to last for 10 years. The Japan Rail Car cars are cheaper ini- tially, but they will wear out in 6 years. The cash flows related to each of the choices are presented below. If the CTA's cost of capital is 8 percent, which type of car should the CTA buy? Support your answer. Year Ovo ANO French Japan Rail Gorncar $(275,000) $(195,000) (10,000) (15,000) (10,000) (15,000) (10,000) (15,000) (10,000) (15,000) (10,000) (15,000) (10,000) (15,000) (10,000) (10,000) 10,000) (10,000) $(375,000) $(285,000) Total 5-30. The City Transit Authority (CTA) is trying to decide between railcars manufactured by French Corp and Japan Rail Car. The French Corp cars cost more to buy initially, but they are expected to last for 10 years. The Japan Rail Car cars are cheaper ini- tially, but they will wear out in 6 years. The cash flows related to each of the choices are presented below. If the CTA's cost of capital is 8 percent, which type of car should the CTA buy? Support your answer. Year Ovo ANO French Japan Rail Gorncar $(275,000) $(195,000) (10,000) (15,000) (10,000) (15,000) (10,000) (15,000) (10,000) (15,000) (10,000) (15,000) (10,000) (15,000) (10,000) (10,000) 10,000) (10,000) $(375,000) $(285,000) Total