You are evaluating two equipment options for a palletizing operation that your company will need for 7 years (If you are unfamiliar with palletizers, you may want to view this video for one example https://youtu.be/-st2R4sxtWE ):

Option 1: Equipment with no pallet handling or stretch wrapping has an initial investment of $98,600. Annual labor expense to perform the shrink wrap task is $8,800.

This equipment has a useable life to you of 6 years, with a $1500 salvage value at 6

years. For the last year of needed service for this option, you will lease equipment for

$18,000 per year and have the same annual labor expense of $8,800.

Option 2: Equipment that does have pallet handling & stretch wrapping has an initial

investment of $148,600. Annual labor expense to perform some basic maintenance is

$1500. This equipment has a useable life to you of 7 years, with $4500 salvage value at

7 years.

If your companys minimum attractive rate of return is 9%, which option do you recommend

and why?