Problem 12-3 Spreadsheet Problem: EAC Approach (LG12-7) You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Kia Rio, which will cost $14,000 to purchase and which will have OCF of -$1,200 annually throughout the vehicle's expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $20,000 to purchase and which will have OCF of -$650 annually throughout that vehicle's expected four-year life. Both cars will be worthless at the end of their life. If you intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future. If the business has a cost of capital of 12 percent, calculate the EAC. Note: Negative amounts should be indicated by a minus sign. Do not round your intermediate calculations. Round your answers to 2 decimal places. Answer is complete but not entirely correct. EAC Rio $ (1,660.93) ☑ EAC Prius $ (11,277.03) X
Problem 12-3 Spreadsheet Problem: EAC Approach (LG12-7) You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Kia Rio, which will cost $14,000 to purchase and which will have OCF of -$1,200 annually throughout the vehicle's expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $20,000 to purchase and which will have OCF of -$650 annually throughout that vehicle's expected four-year life. Both cars will be worthless at the end of their life. If you intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future. If the business has a cost of capital of 12 percent, calculate the EAC. Note: Negative amounts should be indicated by a minus sign. Do not round your intermediate calculations. Round your answers to 2 decimal places. Answer is complete but not entirely correct. EAC Rio $ (1,660.93) ☑ EAC Prius $ (11,277.03) X
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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Transcribed Image Text:Problem 12-3 Spreadsheet Problem: EAC Approach (LG12-7)
You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Kia Rio, which will cost $14,000
to purchase and which will have OCF of -$1,200 annually throughout the vehicle's expected life of three years as a delivery vehicle;
and the Toyota Prius, which will cost $20,000 to purchase and which will have OCF of -$650 annually throughout that vehicle's
expected four-year life. Both cars will be worthless at the end of their life. If you intend to replace whichever type of car you choose
with the same thing when its life runs out, again and again out into the foreseeable future.
If the business has a cost of capital of 12 percent, calculate the EAC.
Note: Negative amounts should be indicated by a minus sign. Do not round your intermediate calculations. Round your answers to
2 decimal places.
Answer is complete but not entirely correct.
EAC Rio
$
(1,660.93) ☑
EAC Prius
$
(11,277.03) X
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