A Garage Is Comparing the Cost of Buying Two Different

question 69

Multiple Choice

A garage is comparing the cost of buying two different car hoists.Hoist A will cost $20,000,will require servicing of $1000 every two years,and last ten years.Hoist B will cost $15,000,require servicing of $800 per year,and last eight years.If the cost of capital is 7%,which is the better option,given that the firm has an ongoing requirement for a hoist?

• A)Hoist A,since it has a greater present value (PV).
• B)Hoist B,since it has a greater present value (PV).
• C)Hoist A,since it has a greater equivalent annual annuity.
• D)Hoist B,since it has a greater equivalent annual annuity.
• E)Hoist A,since it has a lower equivalent annual annuity.

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Definitions:

Services Rendered

Work or duties provided by one party to another, often resulting in payment for the work done.

Income Concepts

Various frameworks and principles used to measure and report income, including realization, recognition, and measurement principles.

Capital Maintenance

A concept in accounting that ensures a company's capital is maintained over time, typically measured in financial or physical terms.

Transactional Approach

An accounting method focusing on individual business transactions and analyzing their effects on financial statements without considering broader economic events.