Choosing Better Investment Option

Question

1. A garage is comparing the cost of buying two different car hoists. Hoist A will cost $20000, will require servicing of $1000 every two years and last ten years. Hoist B will cost $15000, requires servicing of $800 per year and last eight years. If the cost of capital is 7%, which is better option, given that the firm has an ongoing requirement of a hoist?

A. Hoist A, since it has a greater present value (PV)
B. Hoist B, since it has a greater present value (PV)
C. Hoist A, since it has a greater equivalent annual annuity
D. Hoist B, since it has a greater equivalent annual annuity


2.

A company that creates education products is planning to create a suite of books to help customers prepare for high-stakes tests for entry into University and grad school. They have 33 in-house writers to create these books. Due to the expertise needed in creating this content it will not be possible to hire temporary writers within the planned time-frame. Which projects should be undertaken?

A. Prep for the University Entry Test and Prep for the Law School Entry Test
B. Prep for the University Entry Test and Prep for the Grad School Entry Test
C. Prep for the Dental School Entry Test, Prep for the Grad School Entry Test and Prep for the Medical School Entry Test
D. Prep for the Grad School Entry Test, Prep for the Law School Entry Test and Prep for the Medical School Entry Test

Summary

These short questions belong to Finance. The 1st question is about calculating a better car option with cost of capital given. And the 2nd question is about the best subjects to choose for an educational company.

Total Word Count 54