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Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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
Transcribed Image Text:2. B/C RATIO
The city council of Morristown is considering the purchase of one new fire truck.
The options are Truck X and Truck Y. the appropriate financial data are as follows:
Truck X Truck Y
$50,000 $64,000
$5,000
Annual Reduction in fire damage $20,000 | $22,000
Capital investment
Annual Maintenance expenses
$6,000
Life in years
6
6
The purchase is to be financed by money borrowed at 10%. Which truck is
recommended using B/C ratio method.
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