Question

Two options are available for painting your house: (1) oil-based painting, which costs $4,800 and (2) water-based painting, which costs $3,000. The estimated lives of the painting projects are 10 years and 5 years respectively. For either option, no salvage value is expected at the end of the respective service lives. Assume that you will keep and maintain the house for 10 years. At an interest rate of 10%, which of the following statements is correct?

a) On an annual basis, oil-based painting will cost about $850
b) On an annual basis, water-based painting is about $22 cheaper than oil-based painting
c) On an annual basis, both options cost about the same
d) On an annual basis, water-based painting will cost about $820

Answer 1

The answer is "Option C".

Step-by-step explanation:

If options of different retained earnings are assessed, it must use the corresponding annual cost method for drawing a concrete conclusion. As per the task, which is defined in the attached file please find it.