Boji Corporation is considering the purchase of an air conditioning unit and it has these two...
Boji Corporation is considering the purchase of an air conditioning unit and it has these two choices.
|
Unit |
Initial Cost |
Annual Maintenance Cost |
Annual Electricity Cost |
Expected Life |
|
A |
$120,000 |
$10,000 |
$20,000 |
6 years |
|
B |
$80,000 |
$12,000 |
$25,000 |
5 years |
Boji is in the 28% tax bracket. Which unit should it buy? The nominal cost of capital is 12% and the inflation rate is 2%.
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