Two options are available for painting your house: (1) Oil-based paint, whichcosts $5,000 and (2) water-based paint, which costs $3,000. The estimated livesare 10 years and 5 years respectively. For either option, no salvage value isexpected at the end of respective service lives. Assume that you will keep andmaintain the house for 10 years. At an interest rate of 10%, which of the following statement is correct?(a) On an annual basis, Option 1 will cost about $850(b) On an annual basis, Option 2 is about $22 cheaper than Option 1(c) On an annual basis, both options cost about the same(d) On an annual basis, Option 2 will cost about $820.
Two options are available for painting your house: (1) Oil-based paint, whichcosts $5,000 and (2) water-based paint, which costs $3,000. The estimated livesare 10 years and 5 years respectively. For either option, no salvage value isexpected at the end of respective service lives. Assume that you will keep andmaintain the house for 10 years. At an interest rate of 10%, which of the following statement is correct?(a) On an annual basis, Option 1 will cost about $850(b) On an annual basis, Option 2 is about $22 cheaper than Option 1(c) On an annual basis, both options cost about the same(d) On an annual basis, Option 2 will cost about $820.
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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Two options are available for painting your house: (1) Oil-based paint, which
costs $5,000 and (2) water-based paint, which costs $3,000. The estimated lives
are 10 years and 5 years respectively. For either option, no salvage value is
expected at the end of respective service lives. Assume that you will keep and
maintain the house for 10 years. At an interest rate of 10%, which of the following statement is correct?
(a) On an annual basis, Option 1 will cost about $850
(b) On an annual basis, Option 2 is about $22 cheaper than Option 1
(c) On an annual basis, both options cost about the same
(d) On an annual basis, Option 2 will cost about $820.
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