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The LJB Company must replace a freezer and is trying to decide between the following two alternatives: Item                                   Freezer A               Freezer B                                Investment required             (29,000)                   (25,000) Annual electrical bill              (3,000)                     (4,000) Salvage value                         6,000                        5,000 Project life in years                  11                               11 The LJB Company’s cost of capital is 8 percent.  Which investment provides LJB with the lowest total cost

The LJB Company must replace a freezer and is trying to decide between the following two alternatives: Item                                   Freezer A               Freezer B                                Investment required             (29,000)                   (25,000) Annual electrical bill              (3,000)                     (4,000) Salvage value                         6,000                        5,000 Project life in years                  11                               11 The LJB Company’s cost of capital is 8 percent.  Which investment provides LJB with the lowest total cost

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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The LJB Company must replace a freezer and is trying to decide between the following two alternatives:

Item                                   Freezer A               Freezer B                               

Investment required             (29,000)                   (25,000)

Annual electrical bill              (3,000)                     (4,000)

Salvage value                         6,000                        5,000

Project life in years                  11                               11

The LJB Company’s cost of capital is 8 percent.  Which investment provides LJB with the lowest total cost?

 

#9 The LJB Company must replace a freezer and is trying to decide between the following two alternatives: | Item | Freezer A | Freezer B | |-------------------------|-----------|-----------| | Investment required | (29,000) | (25,000) | | Annual electrical bill | (3,000) | (4,000) | | Salvage value | 6,000 | 5,000 | | Project life in years | 11 | 11 | The LJB Company’s cost of capital is 8 percent. Which investment provides LJB with the lowest total cost?
Transcribed Image Text:#9 The LJB Company must replace a freezer and is trying to decide between the following two alternatives: | Item | Freezer A | Freezer B | |-------------------------|-----------|-----------| | Investment required | (29,000) | (25,000) | | Annual electrical bill | (3,000) | (4,000) | | Salvage value | 6,000 | 5,000 | | Project life in years | 11 | 11 | The LJB Company’s cost of capital is 8 percent. Which investment provides LJB with the lowest total cost?
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