OM Construction Company Must Choose Between Two Types of Cranes

question 46

Multiple Choice

OM Construction Company must choose between two types of cranes. Crane A costs
$600,000, will last for 5 years, and will require $60,000 in maintenance each year. Crane B costs $750,000 and will last for seven years and will require $30,000 in maintenance each year. Maintenance costs for cranes A and B are incurred at the end of each year. The appropriate discount rate is 12% per year. Which machine should OM Construction purchase?

• A) Crane A as EAC is $226,444
• B) Crane B as EAC is $194,336
• C) Crane A as the PV is $816,286
• D) Cannot be calculated as the revenues for the project are not given

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Definitions:

Employee Behavioural Perspective

The study of employees' actions and attitudes in the workplace and how they impact both individual and organizational performance.

Job Attitude

An individual's set of opinions, values, and feelings towards their job, influencing their job satisfaction and performance.

Consequences

The results or effects that follow from specific actions, behaviors, or decisions.

Process Theories

focus on understanding the psychological and behavioral processes that motivate individuals to act in certain ways.