Question
In: Finance
You are trying to pick the least-expensive car for your new delivery service. You have two...
You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $20,000 to purchase and which will have OCF of –$2,400 annually throughout the vehicle’s expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $28,500 to purchase and which will have OCF of –$1,250 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 12 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
Solutions
Expert Solution
Use the following inputs on the spreadsheet to calculate the EAC of the 2 cars:
The results obtained are as follows:
jeff jeffy answered 2 years agoRelated Solutions
You are trying to pick the least-expensive car for your new delivery service. You have two...
You are trying to pick the least-expensive car for your new
delivery service. You have two choices: the Scion xA, which will
cost $16,500 to purchase and which will have OCF of −$1,700
annually throughout the vehicle’s expected life of three years as a
delivery vehicle; and the Toyota Prius, which will cost $24,000 to
purchase and which will have OCF of −$900 annually throughout that
vehicle’s expected 4-year life. Both cars will be worthless at the
end of their...
ou are trying to pick the least-expensive car for your new delivery service. You have two...
ou 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...
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