1. Determine which of the two following cash flows is preferable, using a MARR of 8%. You can use any method you prefer and may assume repeatability is an acceptable assumption. Option A requires an initial investment of $39000 and produces for five years an annual return of $11200. The salvage value at five years is expected to be $6000. Option B requires an initial investment of $49000 and produces an annual return for seven years of 13500. Option B requires an additional maintenance cost of $1500 in the third year. The salvage value at seven years is expected to be $10700.

1. Determine which of the two following cash flows is preferable, using a MARR of 8%. You can use any method you prefer and may assume repeatability is an acceptable assumption. Option A requires an initial investment of $39000 and produces for five years an annual return of $11200. The salvage value at five years is expected to be $6000. Option B requires an initial investment of $49000 and produces an annual return for seven years of 13500. Option B requires an additional maintenance cost of $1500 in the third year. The salvage value at seven years is expected to be $10700.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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