The Eketahuna Airport Authority (EAA) must decide, on the basis of lowest lifetime cost, which automated passport scanning system to purchase. The two systems under consideration are:

Scanmaster, and

Eye Spy

Relevant costs are tabled below:

	Scanmaster	Eye Spy
Purchase cost	$4 200 000	$4 800 000
Annual security update cost	$42 000	$48 000
Annual floor space cost	$86 000	$58 000
Annual training cost	$84 000	$36 000
Annual servicing cost	$75 000	$38 000
Salvage value	$600 000	$800 000

In order to comply with international security regulations, the EAA must replace the system after four years. Given that the EAA has a required rate of return of 7% per annum on any investment that it makes, decide which system the EAA should purchase. The decision must be based upon the amount of money to be allocated at the commencement of the four-year cycle, taking into account the present value of future expenditure.

The following excerpts from the NPV and PV of an Annuity tables may assist.

NPV (Present value of $1)

YEAR	5.00%	6.00%	7.00%	8.00%	9.00%	10.00%	11.00%	12.00%
1	0.952	0.943	0.935	0.926	0.917	0.909	0.901	0.893
2	0.907	0.890	0.873	0.857	0.842	0.826	0.812	0.797
3	0.864	0.840	0.816	0.794	0.772	0.751	0.731	0.712
4	0.823	0.792	0.763	0.735	0.708	0.683	0.659	0.636
5	0.784	0.747	0.713	0.681	0.650	0.621	0.593	0.567

PV of an Annuity

YEAR	5.00%	6.00%	7.00%	8.00%	9.00%	10.00%	11.00%	12.00%
1	0.952	0.943	0.935	0.926	0.917	0.909	0.901	0.893
2	1.859	1.833	1.808	1.783	1.759	1.736	1.713	1.690
3	2.723	2.673	2.624	2.577	2.531	2.487	2.444	2.402
4	3.546	3.465	3.387	3.312	3.240	3.170	3.102	3.037
5	4.329	4.212	4.100	3.993	3.890	3.791	3.696	3.605

State which system should be selected so as to minimise lifetime cost.