Pick the least-expensive car for your new delivery service

Assignment Help Financial Management

Reference no: EM131551255

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: EM131551255

Questions Cloud

Where does translation exposure occur : Where does translation exposure occur? Is it in the MNC's home country, or in its host country where it has a subsidiary? Explain and give an example.

Constructed manufacturing plant : Brower, Inc., just constructed a manufacturing plant in Ghana. Determine the NPV for this project. Should Brower build the plant?

The cost of issuing new common stock : Bouchard Company's stock sells for $20 per share, Which of the following is the cost of issuing new common stock?

An increase in the yield to maturity of a bond will result : All else being equal, an increase in the yield to maturity of a bond will result in:

Pick the least-expensive car for your new delivery service : You are trying to pick the least-expensive car for your new delivery service. If the business has a cost of capital of 13 percent, calculate the EAC.

What are the reward-to-risk ratios : If the risk-free rate is 4.0 percent and the market risk premium is 8.6 percent, what are the reward-to-risk ratios of Y and Z?

Particular part of the us federal tax code : A 1031 Exchange refers to a particular part of the US federal tax code that allows

Explain loanable funds theory : What is the future value of $400 in 18 years assuming an interest rate of 8 percent compounded semiannually? Explain Loanable Funds Theory.

Explain an initial public offering : Explain the significance of shareholders’ preemptive rights. Explain An initial public offering (IPO)

User Account

All Pages