Pick the least-expensive car for your new delivery service

Assignment Help Financial Management

Reference no: EM131062835

You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $20,500 to purchase and which will have OCF of –$2,500 annually throughout the vehicle’s expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $29,000 to purchase and which will have OCF of –$1,300 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 11 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: EM131062835

Questions Cloud

What is the predicted retained earnings next year : For the Home Depot Company assume that next years dividends grow by 5%. Given this forecast, what is the predicted retained earnings next year? Use this for the break point of equity cost.

What is the cost of the preferred stock : Burnwood Tech plans to issue some $60 par preferred stock with a 5% dividend. A similar stock is selling on the market for $74. Burnwood must pay flotation costs of 7% of the issue price. What is the cost of the preferred stock?

What is the company cost of preferred stock-rps : Duggins Veterinary Supplies can issue perpetual preferred stock at a price of $52.50 per share with an annual dividend of $5.50 a share. Ignoring flotation costs, what is the company's cost of preferred stock, rps?

Set with an installment loan : Emma Weber purchased bedroom set with an installment loan that has an apr of 12% the bedroom set sells for $2,650. The store financing requires a 15% down payment and 42 monthly payments. What’s the finance charge?

Pick the least-expensive car for your new delivery service : You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $20,500 to purchase and which will have OCF of –$2,500 annually throughout the vehicle’s expected life of three years as..

Shares of common stock outstanding : OMG Inc. has 6 million shares of common stock outstanding, 5 million shares of preferred stock outstanding, and 7,000 bonds. Suppose the common shares sell for $19 per share, the preferred shares sell for $18 per share, and the bonds sell for 108 per..

Stock is expected to pay the dividends : A stock is expected to pay the following dividends: $1.30 in 4 years, $1.50 in 5 years, and $1.95 in 6 years, followed by growth in the dividend of 6% per year forever after that point. There will be no dividends prior to year 4. The stock's required..

What would be involved in the production : Think of a product that you could produce either as a company or an individual. What would be involved in the production? What are the direct costs? Indirect costs? Overhead?

What would be before-tax component cost of debt : Oberon, Inc., has a $40 million (face value) 8-year bond issue selling for 99 percent of par that pays an annual coupon of 8.40 percent. What would be Oberon’s before-tax component cost of debt?

User Account

All Pages