LAEP, Inc. wants to evaluate two methods of shipping their products. The following cash flows are associated with each alternative:
Data | Method |
| A | B |
Life (Years) | 10 | 10 |
First Cost | $700,000 | $1,512,000 |
M&O Cost | $18,000 | $9,000 |
M&O Cost Gradient | $900 | $775 |
Annual Benefit | $154,000 | $303,000 |
Salvage Value | $142,000 | $210,000 |
Annual profits are based on amount of products which can ordinarily be shipped each year as a function of the amount of vehicles or service purchased with the first cost and the M&O costs.
Using a MARR of 15%, calculate the equivalent uniform annual cash flow (EUAB - EUAC) for each alternative.
Determine the most desirable alternative based on the results.