10. Choose the best alternative among the three alternatives given in the table below. Use of annual cash flow analysis is required.| | A | B | C ||----------|---------|-------|---------|| Initial cost | $4500 | $1900 | $1200 || Annual benefit | $2800 | $700 | $300 || Salvage value | $500 | $900 | $0 || Life in years | 2 years| 3 years | Infinity || MARR | 5% | | |This table presents three investment alternatives labeled A, B, and C, each with different parameters affecting potential financial decisions. - **Initial Cost:** The upfront expenditure required to start each alternative.- **Annual Benefit:** The recurring revenue or financial gain expected per year from each option.- **Salvage Value:** The estimated residual value of the asset at the end of its useful life.- **Life in Years:** The expected service life during which the alternative will be operational, with C having an indefinite lifespan (indicated as "Infinity").- **MARR (Minimum Acceptable Rate of Return):** Given at 5%, this is the minimum return expected from any of the investments.Analyzing these parameters can help in determining the most financially beneficial alternative through cash flow analysis considering the specified MARR.

Equivalent Annual Cost = Annual worth Benefit – Annual Worth of cost. Annual worth is calculated…

10. Choose the best alternative among the three alternatives given in the table below. Use of annual cash flow analysis is required. A Initial cost $4500 $1900 $1200 Annual benefit $2800 Salvage value Life in years $700 $300 $500 $900 2 years 3 Years Infinity MARR 5%

10. Choose the best alternative among the three alternatives given in the table below. Use of annual cash flow analysis is required. A Initial cost $4500 $1900 $1200 Annual benefit $2800 Salvage value Life in years $700 $300 $500 $900 2 years 3 Years Infinity MARR 5%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

10. Choose the best alternative among the three alternatives given in the table below. Use of annual cash flow analysis is required.

| | A | B | C |
|----------|---------|-------|---------|
| Initial cost | $4500 | $1900 | $1200 |
| Annual benefit | $2800 | $700 | $300 |
| Salvage value | $500 | $900 | $0 |
| Life in years | 2 years| 3 years | Infinity |
| MARR | 5% | | |

This table presents three investment alternatives labeled A, B, and C, each with different parameters affecting potential financial decisions.
- **Initial Cost:** The upfront expenditure required to start each alternative.
- **Annual Benefit:** The recurring revenue or financial gain expected per year from each option.
- **Salvage Value:** The estimated residual value of the asset at the end of its useful life.
- **Life in Years:** The expected service life during which the alternative will be operational, with C having an indefinite lifespan (indicated as "Infinity").
- **MARR (Minimum Acceptable Rate of Return):** Given at 5%, this is the minimum return expected from any of the investments.

Analyzing these parameters can help in determining the most financially beneficial alternative through cash flow analysis considering the specified MARR.

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