Projects with Different Lives: Your Firm Is Deciding Whether to Purchase

question 33

Multiple Choice

Projects with different lives: Your firm is deciding whether to purchase a durable delivery vehicle or a short-term vehicle. The durable vehicle costs $25,000 and should last five years. The short-term vehicle costs $10,000 and should last two years. If the cost of capital for the firm is 15 percent, then what is the equivalent annual cost for the best choice for the firm? (Round final answer to nearest whole dollar.)

• A) $5,000, either vehicle
• B) $5,000, short-term vehicle
• C) $6,151, short-term vehicle
• D) $7,458, long-term vehicle

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Definitions:

Power and Authority

Refers to the right and capacity of a group or person to enforce decisions and command obedience.

Achievement

The process of achieving a goal or the accomplishment of an aim or purpose, reflecting an individual's success in reaching specific objectives.

Social Interest Index

A measurement tool or method used to evaluate the degree of a person's social interest or concern for the welfare of others.

Superiority Feelings

Emotions or attitudes that arise from a desire to overcome inferiority and achieve superiority.