Question
Better Mousetrap's research laboratories just purchased a new executive jet for its president. The jet is currently underutilized, and management is considering allowing other officers
Better Mousetrap's research laboratories just purchased a new executive jet for its president. The jet is currently underutilized, and management is considering allowing other officers to use it. This move would save $15,500 per year in real terms in airline bills. Offsetting this benefit is the notion that the jet will have to be replaced a year sooner than originally planned. If the jet cost $1,050,000 and was originally expected to last eight years, should management allow other officers to use the jet? The real opportunity cost of is 15%.
| Yes, because the present value of saving, $64,486.51, is greater than the present value of cost, $57,966.48. | |
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| No, because the present value of saving, $69,553.48, is lgreater than the present value of cost, $65,732.14. |
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| No, because the present value of saving, $69,553.48 is less than the present value of cost, $87,038.26. |
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| No, because the present value of saving, $64,486.51, is less than the present value of cost, $76,492.59. |
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