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Two types of earth moving equipment which perform the same service are being considered for purchase....

Two types of earth moving equipment which perform the same service are being considered for purchase. Type A has a first cost of $25000, an estimated life of 8 years, annual operating cost of $3000, and an estimate salvage value of $4000. Type B has a first cost of $35000, an estimated life of 12 years, annual operating cost of $3200, an estimated salvage value of $5500. In addition type B will require a major overhaul costing $ 5000 at the end of the sixth year. Using an interest rate of 12%, determine, using the present worth method, which type should be purchased.

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