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The provincial government's Ministry of Fisheries requires a new patrol boat. The price of a Songster is $45,000, and its annual operating costs will be
- The provincial government's Ministry of Fisheries requires a new patrol boat. The price of a Songster is $45,000, and its annual operating costs will be $5,000. It will be sold for about $10,000 after 4 years, and replaced. A more durable and more efficient Boston Wailer, priced at $66,000, would cost $4,000 per year to operate, last 6 years, and have a resale value of $20,000.
- If the provincial government pays an interest rate of 8% compounded annually on its mid-term debt, which boat should they choose? [7 marks]
- The manufacturer of the boat that you do not choose has offered a manufacturers rebate payable one year after purchase. How large must the rebate be so that the two boats have the same annual cost? [6 marks]
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Intermediate Accounting
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfiel
17th edition
1119503663, 1119571480, 1-119-50368-2, 111950368X, 978-1119503668
