Question: The City Transit Authority CTA is trying to decide between
The City Transit Authority (CTA) is trying to decide between railcars manufactured by French Corp and Japan Rail Car. The French Corp cars cost more to buy initially, but they are expected to last for 10 years. The Japan Rail Car cars are cheaper initially, but they will wear out in six years. The cash flows related to each of the choices are presented below. If the CTA’s cost of capital is 8 percent, which type of car should the CTA buy? Support youranswer.
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