-
Given two alternatives:
Data
A
B
First Cost
$4,000
$6,000
Annual Cost
$1,000
$500
Annual Benefit
$2,000
$2,200
Life, Years
4
10
Salvage Value
$3,000
$1,000
Assuming hat alternatives are replaced at the end of their useful life, determine the better alternative using annual cash flow analysis at an interest rate of 10%.
A. Alternative A, $786
B. Alternative B, $786
C. Alternative A, $384
D. Alternative B, $384
-
Given two alternatives:
Data
A
B
First Cost
$4,000
$6,000
Annual Cost
$1,000
$500
Annual Benefit
$2,000
$2,200
Life, Years
4
10
Salvage Value
$3,000
$1,000
Assuming hat alternatives are replaced at the end of their useful life, determine the better alternative using annual cash flow analysis at an interest rate of 10%.
A. Alternative A, $786
B. Alternative B, $786
C. Alternative A, $384
D. Alternative B, $384
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Related questions
Consider the following two mutually exclusive alternatives. Each alternative has a 10-year useful life and no salvage value. If the interest rate is 10%, which alternative should be selected? Answer in terms of benefit-cost ratio analysis.Ā
Cash flow | A | B |
Initial cost | $6000 | $9000 |
Annual benefit | $1000 | $1500 |
Ā
Assuming that Alternatives B and C are replaces with identical units at the end of their useful lives, and an 8% interest rate, which alternative should be selected? Use an annual cash flow analysis.
A | B | C | |
Cost | $10,000 | $15,000 | $20,000 |
Annual Benefit | $1,000 | $1,762 | $5,548 |
Useful Years | Infinity | 20 | 5 |