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You are starting a family pizza parlor and need to buy a motorcycle for delivery...

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Finance

You are starting a family pizza parlor and need to buy a motorcycle for delivery orders. You have two models in mind. Model A costs $8,200 and is expected to run for 7 years; Model B is more expensive, with a price of $15,600, and has an expected life of 9 years. The annual maintenance costs are $810 for Model A and $620 for Model B. Assume that the opportunity cost of capital is 10 percent.

Calculate equivalent annual costs (EAC) of each models. (Do not round the discount factor. Round intermediate calculations and final answers to 2 decimal places, e.g. 15.25.)

EAC of Model A is $_______

EAC of Model B is $_______

Which one should you buy?

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