A firm is considering the following three alternatives, as well as a fourth choice: do nothing. Each alternative has a 7-year useful life. The firm's minimum attractive rate of return is 9½ %. Alternative A B $100,000 $130,000 24.036 30.198 15.00% 13.87% Initial cost Uniform annual net income Computed rate of return с $330,000 69.936 10.96% Using incremental rate of return comparisons, determine which alternative should be selected.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Problem 7
A firm is considering the following three alternatives, as well as a fourth choice: do
nothing. Each alternative has a 7-year useful life. The firm's minimum attractive rate of
return is 9½ %.
A
Alternative
Initial cost
$100,000
Uniform annual net income
24,036
Computed rate of return
15.00%
B
$130,000
30,198
13.87%
с
$330,000
69,936
10.96%
Using incremental rate of return comparisons, determine which alternative should be
selected.
Transcribed Image Text:Problem 7 A firm is considering the following three alternatives, as well as a fourth choice: do nothing. Each alternative has a 7-year useful life. The firm's minimum attractive rate of return is 9½ %. A Alternative Initial cost $100,000 Uniform annual net income 24,036 Computed rate of return 15.00% B $130,000 30,198 13.87% с $330,000 69,936 10.96% Using incremental rate of return comparisons, determine which alternative should be selected.
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