Option $2($Ch $15)$:

Sandy of Sandy's Submarine Sandwiches was considering two different types of sandwich toasters.

The first option costs $$80,000,$ had a ten$-$year life and a $$1,000$ salvage value. The second option

costs only $$60,000,$ but had only an eight$-$year life $($and still $$1,000$ salvage value$).$ His business's

weighted average cost of capital is $25\%.$ Sandy has figured his cash flows and profits for the life of

both toasters and it is shown in the following table:

What are the payback periods and return on investment for each of these options? Which

toaster should Sandy purchase? In your response calculate the payback period AND rate of return

for Option A$,$ and the payback period AND rate of return for Option B$.$ Make sure you explain

specifically how u reached the results for each of the items.

Sandy has another option to rent a toaster as well. Under what circumstances would it make

sense for Sandy to rent the toaster? Under what circumstances $-$ other than meeting an

acceptable payback period and return on investment $($ROI$)-$ would it make sense to purchase,

rather than rent the toaster?