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:

Quality Upgrade

A quality upgrade involves improving the standard and performance of a product, service, or process, striving for higher efficiency, reliability, and customer satisfaction.

Production Efficiencies

The optimization of resources and processes to maximize output while minimizing waste and costs in manufacturing.