Alternative 1 Alternative 2 Capital investment $18,000 $9,000 $22,000 Annual revenues $11,000 Annual expenses MV at end of useful life $2,900 $4,000 $500 $2,000 Useful life 4 years 12 years IRR 16.5% 30.6%
Alternative 1 Alternative 2 Capital investment $18,000 $9,000 $22,000 Annual revenues $11,000 Annual expenses MV at end of useful life $2,900 $4,000 $500 $2,000 Useful life 4 years 12 years IRR 16.5% 30.6%
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Two mutually exclusive design alternatives are being considered for purchase. Doing nothing is also an option. The estimated cash flows for each alternative
are given below. The MARR is 8% per year. Using the PW method, which alternative, if either, should be recommended? State your assumptions and your reasoning in arriving at a recommendation.
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