1. Your company is trying to decide which of the following options for a new pump for purchasing:

Option 1: a pump that costs $100,000 with $15,000 per year of operating costs

Option 2: a pump that costs $105,000 with $12,000 per year of operating costs

The company uses a discount/interest rate of 5% and is basing this decision on a 5-year operating time frame.

First, write the basic equation that you would use in the space below:

Calculations:

Option 1:

Option 2:

Which option is best?