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a) The incremental ROR between the two vehicles is %. b) The firm should buy (Click to select) vas the incremental ROR is (Click to select) vthe MARR. (Click to select) less than greater than

a) The incremental ROR between the two vehicles is %. b) The firm should buy (Click to select) vas the incremental ROR is (Click to select) vthe MARR. (Click to select) less than greater than

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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b) the firm should buy Toyota or Ford?
The CFO of a consulting engineering firm is deciding between purchasing Ford Explorers and Toyota 4Runners for company principals. The purchase price for the Ford Explorer will be $30,750. Annual maintenance costs for the Explorer are expected to be $575 per year more than that of the 4Runner. The purchase price for Toyota 4Runners is 35,250 The trade- in values after 3 years are estimated to be 50% of the first cost for the Explorer and 60% for the 4Runner. (a) What is the incremental ROR between the two vehicles? (b) Provided the firm's MARR is 15% per year, which vehicle should it buy? a) The incremental ROR between the two vehicles is %. b) The firm should buy (Click to select) as the incremental ROR is (Click to select) v MARR. the (Click to select) less than greater than
Transcribed Image Text:The CFO of a consulting engineering firm is deciding between purchasing Ford Explorers and Toyota 4Runners for company principals. The purchase price for the Ford Explorer will be $30,750. Annual maintenance costs for the Explorer are expected to be $575 per year more than that of the 4Runner. The purchase price for Toyota 4Runners is 35,250 The trade- in values after 3 years are estimated to be 50% of the first cost for the Explorer and 60% for the 4Runner. (a) What is the incremental ROR between the two vehicles? (b) Provided the firm's MARR is 15% per year, which vehicle should it buy? a) The incremental ROR between the two vehicles is %. b) The firm should buy (Click to select) as the incremental ROR is (Click to select) v MARR. the (Click to select) less than greater than
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