A Janitorial Services Firm Is Considering Two Brands of Industrial

question 44

Multiple Choice

A janitorial services firm is considering two brands of industrial vacuum cleaners to equip their staff. Option A will cost $1,500, require servicing of $200 per year, and it will last five years. Option B will cost $1,000, require servicing of $100 per year, and it will last three years. If the cost of capital is 8%, which is the better option, given that the firm has an ongoing requirement for vacuum cleaners?

• A) Option A, since it has a lower equivalent annual annuity.
• B) Option B, since it has a lower equivalent annual annuity.
• C) Option A, since it has a greater equivalent annual annuity.
• D) Option B, since it has a greater equivalent annual annuity.

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Definitions:

Assumption Of Risk

A traditional defense to negligence liability based on the argument that the plaintiff voluntarily exposed himself to a known danger created by the defendant’s negligence.

Comparative Fault

Often used synonymously with comparative negligence. But also sometimes used to refer to a defense that operates like comparative negligence but considers the plaintiff’s and the defendant’s overall fault rather than either’s negligence alone.

Fault

A defect, mistake, or error in a system or character that often leads to malfunction or adverse outcomes.

Legal Theory Of Negligence

A legal doctrine that makes a person or entity liable for harm caused by failing to act as a reasonably prudent person would under the same circumstances.