Subject: Business / Finance
Your company is evaluating two different network systems for its main factory:
Option A will cost $4.00 million and $300,000 annually to operate, and has a life of four years. Option B will cost $6.80 million and $200,000 per year to operate, and has a life of seven years.
Assume all maintenance costs occur at year-end while you have to pay upfront for machines. Suppose there are no taxes and the appropriate discount rate is 9.00%, what will it cost to choose the option you chose above (in Q.6) and replace the system indefinitely? (Enter an amount rounded off to the nearest whole number but without the $ sign.)