Traveler Inc. needs to purchase a new photocopy machines for its office. There are two

models the management is considering. The first model costs $20,000 and while the second

model costs $30,000. Both machines have an expected lifetime of 5 years. The annual

maintenance costs of each model are given below.

25.

			1			2			3			4			5
	Model 1			$1,500			$1,500			$20,00			$2,000			$2,000
	Model 2			$2,000			$2,000			$2,000			$2,000			$2,000

If the WACC of the company is 10%, what would your recommendation be?

1. a) Select Model 1.

2. b) Select Model 2.

3. c) Reject both models.

4. d) Select both models.