Choosing among Alternatives Tom Thurlow wants to buy a boat but is short of cash. Two alternatives are available: Tom can accept $7,500 per year from his brother for partial ownership in the boat, or he can earn money by renting the boat to others. Rental income would be $10,000 per year. Under either alternative, the boat will last eight years. If Tom rents the boat out, he will have to pay $15,000 to overhaul the engine at the end of the fourth year.

Required:

Which alternative should Tom select, assuming that the cost of capital is 12% and that only quantitative considerations are involved?