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.

Comprehend the significance of the cost of capital in project evaluation and its calculation.

Recognize the challenges in evaluating mutually exclusive projects and the solutions to those challenges.

Understand the principles and application of the profitability index in investment decision making.

Analyze the concepts of capital budgeting decisions, including capital rationing and project selection based on financial metrics.

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