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The LJB Company must replace a freezer and is trying to decide between the following two alternatives: Item Freezer A Freezer B Investment required ($29,000)
The LJB Company must replace a freezer and is trying to decide between the following two alternatives:
| Item | Freezer A | Freezer B |
|---|---|---|
| Investment required | ($29,000) | ($25,000) |
| Annual electrical bill | (3,000) | (4,000) |
| Salvage value | 6,000 | 5,000 |
| Project life in years | 11 | 11 |
The LJB Companys cost of capital is 8 percent.
Which investment provides LJB with the lowest total cost?
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