The Stark County Executives Are Considering the Purchase of New

Multiple Choice

The Stark County executives are considering the purchase of new 130 hp bulldozer and are comparing two models: the BEHEMOTH and the GOLIATH. The BEHEMOTH bulldozer costs $130,000, with a projected annual operating and maintenance cost of $31,000 and a salvage value $15,000 after 7 years. The GOLIATH model costs $175,000, with a projected annual operating and maintenance cost of $22,000 and a salvage value of $21,000 after 7 years.
-Find the net present value of the BEHEMOTH compressor if the cash flows are discounted annually at 7%. Find the net present value of the GOLIATH compressor if the cash flows are discounted annually at 7%. Which model should be purchased based on these calculations?

A) BEHEMOTH
B) GOLIATH
C) Either one can be purchased.
D) Neither, since both will incur enormous loss.
E) Need additional information to decide