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?
A) Hoist A, since it has a greater present value (PV).
B) Hoist B, since it has a greater present value (PV).
C) Hoist A, since it has a greater equivalent annual annuity.
D) Hoist B, since it has a greater equivalent annual annuity.
Answer: D
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