We plan to operate a professional dishwasher. We need to choose between two types of tablets: Kalgonit
Question:
We plan to operate a professional dishwasher. We need to choose between two types of tablets: Kalgonit and Ludwig. One jumbo-pack of the former costs $200 and lasts for 3 years. The latter are two times cheaper but last for only 2 years. Ludwig tablets have also another disadvantage. They make the dishwasher outwear faster. When we operate it using Ludwig tablets we need to replace it after 5 years instead of 7 years. The cost of a new dishwasher is $500. Our current dishwasher is quite old-fashioned, and we plan to replace it with a new one after two years (regardless of which tablets we will use). Assuming that our real opportunity cost of capital is 9% which tablets we should buy? Treat all numerical values as given in real terms.
Cost Of CapitalCost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...
Step by Step Answer:
Accounting Theory Conceptual Issues in a Political and Economic Environment
ISBN: 978-1412991698
8th edition
Authors: Harry Wolk, James Dodd, John Rozycki