You are trying to pick the least expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $13,000 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 $23,000 to purchase and which will have OCF of -$550 annually throughout that vehicle's expected five-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, and if your business has a cost of capital of 12 percent, what is the difference in the EAC of the two cars? Multiple Choice $413.25 $310.38 $317.88
You are trying to pick the least expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $13,000 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 $23,000 to purchase and which will have OCF of -$550 annually throughout that vehicle's expected five-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, and if your business has a cost of capital of 12 percent, what is the difference in the EAC of the two cars? Multiple Choice $413.25 $310.38 $317.88
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:You are trying to pick the least expensive car for your new delivery service. You have two choices: the Scion xA, which
will cost $13,000 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 $23,000 to purchase and which will have OCF of
-$550 annually throughout that vehicle's expected five-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, and if your business has a cost of capital of 12 percent, what is the difference in the EAC of
the two cars?
Multiple Choice
$413.25
$310.38
$317.88
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