Tom Thurlow wants to buy a boat but is short of cash. Two alternatives are available: Tom

Question:

Tom Thurlow wants to buy a boat but is short of cash. Two alternatives are available: Tom can accept $5,000 per year from his brother for partial ownership in the boat, or he can earn money by renting the boat to others. Rental income would be $7,500 per year. Under either alternative, the boat will last eight years. If Tom rents the boat out, he will have to pay $13,000 to overhaul the engine at the end of the fourth year.
Required:
Which alternative should Tom select, assuming that the is 12% and that only quantitative considerations are involved?

Cost Of Capital
Cost 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...