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ou are in the market for a new internet router, thus comparing two different expensive

models for your business. You will be using both devices for $10$ years. Which router would you buy

$($based on the data below in the table$)?.$ Assume that the interest rate is $8\%$ for both devices. Do a net

present worth analysis $(15$pts$)$ NO CREDIT WILL BE GIVEN IF THE VIDEO SOLUTION IS NOT PROVIDED

$($YOUR GRADE WILL BE BASED ON YOUR SOLUTION $+$ HOW WELL YOU DESCRIBE YOUR SOLUTION$)$

Device

Name

Cost Uniform Annual

Benefits

Uniform Annual Benefits

increase per year

Salvage

Value

$$High performance$$ Life

$($related to salvage value$)$

Router A $$600$ $$1000\%$ $$2505$ years

Router B $$700$ $$100\%3$ $$18010$ years

Hint$1$: Assume that you will continue to use router A for $10$ years, but it will have no salvage value after

$5$ years, meanwhile Router B will still bring $$180$ after $10$ years.

Hint$2$: Uniform annual benefits start at $$year $1.$Note that It gradually increases by $3\%$ per year for

router B

Question $8$: You are purchasing a new $2021$ BMW $5$ series for $$65,000.$ You have decided to keep this

vehicle forever. However, you need to spend a lot of money to keep the BMW in good shape: $(1)$ the

annual maintenance cost is going to be $$0$ for the first $4$ years, then $$2,000$ a year thereafter $($at year $5$

and so on$),(2)$ water pump has to be serviced periodically every $5$ years at a cost of $$1,500,(3)$ one time

expenditure of $$8,000$ will have to be at the end of the $8$th years for a new turbo system. Calculate the

capitalized cost at i$=5\%(15$pts$)$ NO CREDIT WILL BE GIVEN IF THE VIDEO SOLUTION IS NOT PROVIDED

$($YOUR GRADE WILL BE BASED ON YOUR SOLUTION $+$ HOW WELL YOU DESCRIBE YOUR SOLUTION$)$

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