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:

Defensive Strategy

A business approach aimed at protecting the company's current market position and assets from potential threats or competition.

Corporate Social Responsibility

A business model that helps a company be socially accountable—to itself, its stakeholders, and the public—by practicing ethical and sustainable actions.

Legally Required

Refers to actions or processes that are mandated by law or regulation, often ensuring compliance or safety standards are met.

Obstructionist Strategy

A corporate approach where a company takes actions to block or delay certain policies or initiatives, often for strategic or competitive reasons.