A company with a Minimum Attractive Rate of Return (MARR) of 10% is considering two mutually exclusive options. Neither option has a salvage value. The two options have different lives. Like replacement will be assumed, with a 15-year horizon. The cash flow for one cycle for each option is shown below.| | Option #1 | Option #2 ||-------------------|-----------|-----------|| First Cost | $35,000 | $42,000 || Annual Benefits | $20,000 | $15,000 || Life | 3 years | 5 years |When performing an Equivalent Annual Cash Flow Analysis, the Equivalent Uniform Annual (EUA) Benefit-Cost (B-C) for Option #1 is closest to:- a. $5,925- b. $9,280- c. $12,720- d. $34,070

Here , we need to find out net present value first and then divided it with discount factor.

A company with a MARR = 10% is considering two mutually exclusive options. Neither option has a salvage value. The two options have different lives. Like replacement will be assumed, with a 15 year horizon. The cash flow for one cycle for each option is shown below. First Cost Annual Benefits Life Option #1 $35,000 $20,000 3 years Option #2 $42,000 $15,000 5 years When performing an EQUIVALENT ANNUAL CASH FLOW ANALYSIS, the EUA(B-C) for Option #1 is closest to: O a. $5,925 O b. $9,280 O C. $12,720 O d. $34,070

A company with a MARR = 10% is considering two mutually exclusive options. Neither option has a salvage value. The two options have different lives. Like replacement will be assumed, with a 15 year horizon. The cash flow for one cycle for each option is shown below. First Cost Annual Benefits Life Option #1 $35,000 $20,000 3 years Option #2 $42,000 $15,000 5 years When performing an EQUIVALENT ANNUAL CASH FLOW ANALYSIS, the EUA(B-C) for Option #1 is closest to: O a. $5,925 O b. $9,280 O C. $12,720 O d. $34,070

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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

A company with a Minimum Attractive Rate of Return (MARR) of 10% is considering two mutually exclusive options. Neither option has a salvage value. The two options have different lives. Like replacement will be assumed, with a 15-year horizon. The cash flow for one cycle for each option is shown below.

| | Option #1 | Option #2 |
|-------------------|-----------|-----------|
| First Cost | $35,000 | $42,000 |
| Annual Benefits | $20,000 | $15,000 |
| Life | 3 years | 5 years |

When performing an Equivalent Annual Cash Flow Analysis, the Equivalent Uniform Annual (EUA) Benefit-Cost (B-C) for Option #1 is closest to:

- a. $5,925
- b. $9,280
- c. $12,720
- d. $34,070

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