You are starting a family pizza parlor and need to buy a motorcycle for delivery orders. You

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You are starting a family pizza parlor and need to buy a motorcycle for delivery orders. You have two models in mind. Model A costs $9,000 and is expected to run for six years; model B is more expensive, with a price of $14,000, and has an expected life of 10 years. The annual maintenance costs are $800 for model A and $700 for model B. Assume that the opportunity cost of capital is 10 percent. Which one should you buy?


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...
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Fundamentals of corporate finance

ISBN: 978-0470876442

2nd Edition

Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates

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