You run a construction company. You need to lease a crane for a two-year project. There are two suppliers which can supply a suitable crane. The first, Acme Cranes, will cost $60,000 immediately and $50,000 in a year. At the end of the rental in two years Acme will give back $11,000 if the crane is in good shape. The second company, Bobco Rentals, will cost $65,000 immediately and $55,000 in a year. At the end of the rental in two years Bobco will give back $22,000 if the crane is in good shape. If money is valued at 11% simple and using today as your comparison date, which company has the lower cost? Assume the crane will be returned in good shape.

You run a construction company. You need to lease a crane for a two-year project. There are two suppliers which can supply a suitable crane. The first, Acme Cranes, will cost $60,000 immediately and $50,000 in a year. At the end of the rental in two years Acme will give back $11,000 if the crane is in good shape. The second company, Bobco Rentals, will cost $65,000 immediately and $55,000 in a year. At the end of the rental in two years Bobco will give back $22,000 if the crane is in good shape. If money is valued at 11% simple and using today as your comparison date, which company has the lower cost? Assume the crane will be returned in good shape.

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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