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Suppose an engineering firm is comparing the cost of buying two different Hydraulic lifts. Lift A will cost $20,000, will require servicing of $1,000 every
Suppose an engineering firm is comparing the cost of buying two different Hydraulic lifts. Lift A will cost $20,000, will require servicing of $1,000 every two years, and last ten years. Lift B will cost $15,000, require servicing of $800 per year, and last eight years. If the cost of capital is 7%, which is the better option, given that the firm has an ongoing requirement for a lift? Lift A, since it has a greater present value (PV). Lift A, since it has a greater equivalent annual annuity. Lift B, since it has a greater equivalent annual annuity. Lift B, since it has a greater present value (PV)
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