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2 (20 points) Pace Corporation in Cookeville is considering an extended warranty on production Pace Corporation in Cookeville
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Answer #1
Equivalent uniform annual warranty cost
PV value of annual warranty cash flow
Year Cash Flow Discount Factor Discounted Cash Flow
1 5000 0.926 4630
2 3000 0.857 2572
3 5000 0.794 3969
4 3000 0.735 2205
NPV 13376
Therefore aannual warranty cost = 13376/4
=$3343
Therefore option A is correct
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