A janitorial services firm is considering two brands of industrial vacuum cleaners to equip their staff. Option A will cost $1,500, require servicing of $200 per year, and it will last five years. Option B will cost $1,000, require servicing of $100 per year, and it will last three years. If the cost of capital is 8%, which is the better option, given that the firm has an ongoing requirement for vacuum cleaners? O Option A, since it has a greater equivalent annual cost. O Option B, since it has a greater equivalent annual cost. O Option B, since it has a lower equivalent annual cost. O Option A, since it has a lower equivalent annual cost.
A janitorial services firm is considering two brands of industrial vacuum cleaners to equip their staff. Option A will cost $1,500, require servicing of $200 per year, and it will last five years. Option B will cost $1,000, require servicing of $100 per year, and it will last three years. If the cost of capital is 8%, which is the better option, given that the firm has an ongoing requirement for vacuum cleaners? O Option A, since it has a greater equivalent annual cost. O Option B, since it has a greater equivalent annual cost. O Option B, since it has a lower equivalent annual cost. O Option A, since it has a lower equivalent annual cost.
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 4P
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