You are trying to pick the least expensive car for your new delivery service. You have two choices: the Scion XA, which will cost $13000 to purchase and which will have a 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 have a OCT of -$500 annually throughout the vehicle's expected 5-years life. Both cars will be worthless at the end of thier 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 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?
You are trying to pick the least expensive car for your new delivery service. You have two choices: the Scion XA, which will cost $13000 to purchase and which will have a 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 have a OCT of -$500 annually throughout the vehicle's expected 5-years life. Both cars will be worthless at the end of thier 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 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?
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