8-6. Annual expenses for two alternatives have been estimated on different bases as follows: End of Year 1 2 3 4 Alternative A Annual Expenses Estimated in Actual Dollars $120,000 132,000 148,000 160,000 Alternative B Annual Expenses Estimated in Real Dollars with b=0 $100,000 110,000 120,000 130,000 If the average general price inflation rate is expected to be 4% per year and the real rate of interest is 8% per year, show which alternative has the least negative equivalent worth in the base period? (8.2)

8-6. Annual expenses for two alternatives have been estimated on different bases as follows: End of Year 1 2 3 4 Alternative A Annual Expenses Estimated in Actual Dollars $120,000 132,000 148,000 160,000 Alternative B Annual Expenses Estimated in Real Dollars with b=0 $100,000 110,000 120,000 130,000 If the average general price inflation rate is expected to be 4% per year and the real rate of interest is 8% per year, show which alternative has the least negative equivalent worth in the base period? (8.2)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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