Reference no: EM132670239

Problem 1: Your firm's discount rate is 30 percent. You are considering the purchase of Truck A or Truck B. Truck A costs $100, has a useful life of 3 years, no salvage value and maintenance costs of $10 per year. Truck B costs $80, has a useful life of 2 years, no salvage value and maintenance costs of $15 per year. Which truck should you select and why?

Group of answer choices

Option 1: Truck A because the EAC of -53.8 is less than Truck B's EAC of -64.2

Option 2: Truck B because the EAC of 73.8 is greater than Truck A's EAC of 65.1.

Option 3: Truck A because the EAC of -65.1 is less than Truck B's EAC of -73.8.

Option 4: Truck A because the NPV of 118 if larger than B's NPV of 100.