Multiple choice Q:

Your boss asks you to evaluate the purchase of a new battery-operated toaster for his restaurant chain. The toaster [ BT ] costs $75 per unit, and has an estimated useful life of four years. The toaster requires batteries once a week yielding an annual operating cost of $97 per year; salvage value of both toaster and batteries is $15. The alternative is to purchase an electric toaster [ ET ] that will last six years and costs $280. The estimated annual electric bill for this toaster is $56, and it has an expected salvage value of $50. The company anticipates purchase of 10000 toasters for eternity. Assume a tax rate of 25% and a WACC of 10%. If toaster BT's annual battery costs increase by $5 and ET's toaster cost increase by $5 which toaster would you recommend now?

Answer from one of the following:

BT: AEC $93.04

ET: AEC $94.45

BT: AEC $94.45

ET: AEC $93.04

none of them