A company is buying a sound system.
Type A
Will cost £20,000
Will not need servicing.
Type B
Will cost £15,000.
Will need servicing at the end of each year.
Cost of servicing - £2000.
Both systems only last 5 yrs.
Cost of finance = 8%.
In present value terms, what's the cost of Type B so that we can compare with the cost of Type A?