A Janitorial Services Firm Is Considering Two Brands of Industrial

Multiple Choice

A janitorial services firm is considering two brands of industrial vacuum cleaner to equip their staff.Option A will cost $1500,will require servicing of $200 per year,and last five years.Option B will cost $1000,require servicing of $100 per year,and last three years.If the cost of capital is 8%,which is the better option,given that the firm has an ongoing requirement for vacuum cleaners?

A) Option A,since it has a lower equivalent annual annuity.
B) Option B,since it has a lower equivalent annual annuity.
C) Option A,since it has a greater equivalent annual annuity.
D) Option B,since it has a greater equivalent annual annuity.
E) Both options have the same equivalent annual annuity.