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A garage is comparing the cost of buying two different car hoists Hoist A will cost $20000 will require servicing of $1000 every two years, and last ten years Hoist B will cost $15000 require

A garage is comparing the cost of buying two different car hoists. Hoist A will cost $20,000, will require servicing of $1000 every two years, and last ten years. Hoist B will cost $15,000, require servicing of $800 per year, and last eight years. If the cost of capital is 7%, which is the better option, given that the firm has an ongoing requirement for a hoist?

Question 10 options:

 
1) Hoist A, since it has a greater present value (PV).
 
2) Hoist B, since it has a greater present value (PV).
 
3) Hoist A, since it has a greater equivalent annual annuity.
 
4) Hoist B, since it has a greater equivalent annual annuity.

May 19 2020 View more View Less

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