A firm is considering three mutually exclusive alternatives as part of a production improvement program. The alternatives are as follows: A B C Installed cost $8,000 $12,000 $16,000 Uniform annual benefit 1,600 1,750 2,050 Useful life, in years 10 20 20 For each alternative, the salvage value at the end of useful life is zero. At the end of 10 years, Alt. A could be replaced by another A with identical cost and benefits. (a)Construct a choice table for interest rates from 0% to 100%. (b)The MARR is 12%. If the analysis period is 20 years, which alternative should be selected?
A firm is considering three mutually exclusive alternatives as part of a production improvement program. The alternatives are as follows: A B C Installed cost $8,000 $12,000 $16,000 Uniform annual benefit 1,600 1,750 2,050 Useful life, in years 10 20 20 For each alternative, the salvage value at the end of useful life is zero. At the end of 10 years, Alt. A could be replaced by another A with identical cost and benefits. (a)Construct a choice table for interest rates from 0% to 100%. (b)The MARR is 12%. If the analysis period is 20 years, which alternative should be selected?
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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A firm is considering three mutually exclusive alternatives as part of a production improvement program. The alternatives are as follows:
|
A |
B |
C |
|
|
Installed cost |
$8,000 |
$12,000 |
$16,000 |
|
Uniform annual benefit |
1,600 |
1,750 |
2,050 |
|
Useful life, in years |
10 |
20 |
20 |
For each alternative, the salvage value at the end of useful life is zero. At the end of 10 years, Alt. A could be replaced by another A with identical cost and benefits.
(a)Construct a choice table for interest rates from 0% to 100%.
(b)The MARR is 12%. If the analysis period is 20 years, which alternative should be selected?
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