A garage is comparing the cost of buying two different car hoists. Hoist A will cost $20,000, will require servicing of $1000 every two years, and last ten years. Hoist B will cost $15,000, require servicing of $800 per year, and last eight years. If the cost of capital is 7%, which is the better option, given that the firm has an ongoing requirement for a hoist?

Question

Quizplus · Accepted Answer

Hoist B has a greater equivalent annual annuity because its annual servicing cost is lower and its lifespan is shorter.

A Garage Is Comparing the Cost of Buying Two Different