Question
Your boss asks you to evaluate the purchase of a new battery-operated toaster for his restaurant chain. The toaster [ BT ] costs $375 per
Your boss asks you to evaluate the purchase of a new battery-operated toaster for his restaurant chain. The toaster [ BT ] costs $375 per unit, and has an estimated useful life of six years. The toaster requires batteries once a week yielding an annual operating cost of $130 per year; salvage value of both toaster and batteries is $35. The alternative is to purchase an electric toaster [ ET ] that will last ten years and costs $1200. The estimated annual electric bill for this toaster is $25, and it has an expected salvage value of $300. The company anticipates purchase of 10000 toasters for eternity. Assume a tax rate of 21% and a WACC of 9%. If toaster BT's annual battery costs increase by $5 and ET's toaster cost increase by $5 which toaster would you recommend now? Group of answer choices
BT: AEC $173.44
ET: AEC $170.56
ET: AEC $173.44
none of them
BT: AEC $170.56
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