Your boss asks you to evaluate the purchase of a new battery-operated toaster for his restaurant chain. The toaster [ BT ] costs $22 per unit, and has an estimated useful life of six years. The toaster requires batteries once a week yielding an annual operating cost of $96 per year; salvage value of both toaster and batteries is $12. The alternative is to purchase an electric toaster [ ET ] that will last seven years and costs $150. The estimated annual electric bill for this toaster is $60, and it has an expected salvage value of $11. If the company anticipates purchase of 10000 toasters for eternity, which model should you recommend? (Assume a tax rate of 35% and a WACC of 9%.)

Answer rating: 100% (QA)

For toaster BT Cost 375 Annual Operating Cost 130 5 135 Salvage 35 Life 6 years Annu... View the full answer