A telecommunications firm is considering a product expansion of a popular cell phone. Two alternatives for the cell phone expansion are summarized below. The company uses a MARR of 8% per year for decisions of this type, and repeatability may be assumed. Which alternative should be recommended and why?

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Question 1:
A telecommunications firm is considering a product expansion of a popular cell phone. Two
alternatives for the cell phone expansion are summarized below. The company uses a MARR of 8%
per year for decisions of this type, and repeatability may be assumed. Which alternative should be
recommended and why?
Capital investment
Annual revenue
Annual expenses
Salvage value
Useful life
Expansion A
$1,000,000
$760,000
$500,000
$100,000
6 years
Expansion B
$1,250,000
$580,000
$360,000
$150,000
8 years
Transcribed Image Text:Question 1: A telecommunications firm is considering a product expansion of a popular cell phone. Two alternatives for the cell phone expansion are summarized below. The company uses a MARR of 8% per year for decisions of this type, and repeatability may be assumed. Which alternative should be recommended and why? Capital investment Annual revenue Annual expenses Salvage value Useful life Expansion A $1,000,000 $760,000 $500,000 $100,000 6 years Expansion B $1,250,000 $580,000 $360,000 $150,000 8 years
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