Question
A local franchise of Merry Maids, a cleaning service company, is looking to buy new cars. The franchise owner is considering two models: 2019 Ford
A local franchise of Merry Maids, a cleaning service company, is looking to buy new cars. The franchise owner is considering two models: 2019 Ford Focus Electric for $30,000 or 2019 Ford Focus Gas for $22,000. Both models are expected to last for 10 years and will have no value thereafter. The electric model is projected to cost about $200 per year in electricity, while the gas model will cost about $1,500 in gas expenses per year. The firms weighted average cost of capital is 8% APR. If the cost of electricity and gas are not expected to change over time, and all other car ownership expenses are expected to be the same for both models, which model should the franchise purchase and why? You must provide quantitative evidence to support your recommendation.
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