A Janitorial Services Firm Is Considering Two Brands of Industrial

question 1

Multiple Choice

A janitorial services firm is considering two brands of industrial vacuum cleaners to equip their staff.Option A will cost $1500,will require servicing of $200 per year,and last five years.Option B will cost $1000,require servicing of $100 per year,and last three years.If the cost of capital is 8%,which is the better option,given that the firm has an ongoing requirement for vacuum cleaners?

• A)Option A,since it has a lower equivalent annual annuity.
• B)Option B,since it has a lower equivalent annual annuity.
• C)Option A,since it has a greater equivalent annual annuity.
• D)Option B,since it has a greater equivalent annual annuity.

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Definitions:

Demand Curve

A graphical representation showing the relationship between the quantity of a good consumers are willing to buy and its price level.

Profit-Maximizing Output

The point of maximum profitability for a company is reached when its marginal cost is equal to its marginal revenue, indicating the optimal production level.

Antimacassars

Protective coverings used on the backs and arms of furniture to prevent them from soiling or wear, typically made of fabric or lace.

Monopoly

A market structure characterized by a single seller who has exclusive control over the supply of a good or service, and where there are high barriers to entry for potential competitors.