Business has cost of capital

Assignment Help Financial Management

Reference no: EM132005907

You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $24,000 to purchase and which will have OCF of –$3,200 annually throughout the vehicle’s expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $32,500 to purchase and which will have OCF of –$1,650 annually throughout that vehicle’s expected 4-year life. Both cars will be worthless at the end of their life. 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.

If the business has a cost of capital of 13 percent, calculate the EAC. (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)

Scion's EAC $

Toyota's EAC $

Which one should you choose?

Toyota

Scion

Reference no: EM132005907

Questions Cloud

Present value of perpetual stream of annual cash flows : What is the present value of a perpetual stream of annual cash flows of $100, with the first cash flow to be received in one year, assuming discount rate of 8%.

What is the total amount paid by the corporation : what is the total amount paid by the corporation if it acts rationally(after accounting for the premium paid)?

Manner suggested by purchasing power parity : After supply and demand for the Japanese yen has adjusted in the manner suggested by purchasing power parity, the new exchange rate for the yen will be:

Effective annual rate-nominal interest rate : Effective annual rate (EAR or EFF%); nominal (quoted) interest rate; APR; periodic rate

Business has cost of capital : If the business has a cost of capital of 13 percent, calculate the EAC.

Explain recommended financing strategy : For the selected company, develop and explain a recommended financing strategy.

Result from the act of this covered interest arbitrage : Which of the following forces should result from the act of this covered interest arbitrage?

Income statement and statement of cash flows : After exploring the three big financial statements, the Balance Sheet, Income Statement and Statement of Cash Flows,

How many years will it take to reach your goal : you expect to earn 12% annually on the account. How many years will it take to reach your goal?

User Account

All Pages