Multiple choice Q:

Your boss asks you to evaluate the purchase of a new battery-operated toaster for his restaurant chain. The toaster [ BT ] costs $75 per unit, and has an estimated useful life of four years. The toaster requires batteries once a week yielding an annual operating cost of $97 per year; salvage value of both toaster and batteries is $15. The alternative is to purchase an electric toaster [ ET ] that will last six years and costs $280. The estimated annual electric bill for this toaster is $56, and it has an expected salvage value of $50. If the company anticipates purchase of 10000 toasters for eternity, which model should you recommend? Assume a tax rate of 25% and a WACC of 10%.

Answer from the following:

ET: AEC $89.76

BT: AEC $89.76

BT: AEC $89.3

none of them

ET: AEC $89.3