You are considering investment in one of the following
two options. Assume an interest rate of 12% per year, compounded
monthly. Option A & Option B
Initial Cost, respectively
-$100,000
-$800,000
Quarterly Maintenance Cost, respectively
-$26,000
-$15,000
Salvage Value, respectively
$16,000
$200,000
Lifespan (years) 2 & 4, respectively
a. What is the effective monthly interest
rate?
b. What is the effective quarterly interest rate (to 2
decimal places)?
c. Draw cash flow diagrams for the two
projects.
d. Calculate the...