A Garage Is Comparing the Cost of Buying Two Different

question 37

Multiple Choice

A garage is comparing the cost of buying two different car hoists. Hoist A will cost $20 000, will require servicing of $1 000 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 B, since it has a greater present value (PV).
• B)Hoist B, since it has a greater equivalent annual annuity.
• C)Hoist A, since it has a greater equivalent annual annuity.
• D)Hoist A, since it has a greater present value (PV).

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Definitions:

Weak Relationship

Describes a connection or correlation between variables that is minimal or not statistically significant.

Subjective Predictors

Variables perceived by individuals that they believe will predict future outcomes, often based on personal judgment.

Happiness

A state of wellness characterized by emotions ranging from contentment to intense joy.

Catharsis Theory

The proposition that expressing negative emotions produces a healthy release of those emotions and is therefore good for the psyche.