(Answered) Metal ltd is looking at producing power boardsnbspthe

Finance

Metal Ltd is looking at producing power boards. The company is considering alternative production methods. The costs (in million) and lives associated with each are:

Model

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Model 1

-$90

-$2

Model 2

-$80

-$8

Assume the discount rate is 10%, which model should Metal buy?

a.Metal Ltd should choose Model 1 as its annual equivalent cost is lower.

b.Metal Ltd should choose Model 1 as its annual equivalent cost is higher.

c.Metal Ltd should choose Model 2 as its annual equivalent cost is lower.

d.Metal Ltd should choose Model 2 as its annual equivalent cost is higher.

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