You Are Trying to Pick the Least Expensive Car for Your

question 77

Multiple Choice

You are trying to pick the least expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $13,000 to purchase and which will have OCF of −$1,200 annually throughout the vehicle's expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $23,000 to purchase and which will have OCF of −$550 annually throughout that vehicle's expected five-year life. Both cars will be worthless at the end of their life. If you intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future, and if your business has a cost of capital of 16 percent, what is the difference in the EAC of the two cars?

• A) $381.36
• B) $428.04
• C) $586.07
• D) $601.51

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Definitions:

Emerging Adulthood

A phase of the life span between adolescence and full-fledged adulthood, spanning approximately ages 18 to 25, characterized by exploration of identity and self-direction.

First-Time Parenthood

The experience of becoming a parent for the first time, encompassing the challenges and adjustments faced in the new role.

Emerging Adults

Individuals in a life stage occurring roughly between the ages of 18 and 25, where they explore various aspects of identity and self-concept before making adult commitments.