### Comparison of Three Mutually Exclusive AlternativesThe table below evaluates three alternatives (A1, B2, C3) by comparing their capitalized costs at an interest rate of 10% per year.| Alternative | A1 | B2 | C3 ||-------------|--------|--------|-----------|| **First cost, $** | -50,000 | -300,000 | -900,000 || **AOC, $/year** | -30,000 | -10,000 | -3,000 || **Salvage value, $** | 5,000 | 70,000 | 200,000 || **Life, years** | 2 | 4 | ∞ |#### Explanation:- **First cost:** Initial investment required for each alternative.- **AOC (Annual Operating Cost):** Yearly cost of operating the alternative.- **Salvage value:** Expected resale value at the end of its life.- **Life:** Expected duration of usefulness for the equipment or project, with C3 having an infinite lifespan.This information helps in determining the most cost-effective option when considering the capitalized costs.

Compare three mutually exclusive alternatives on the basis of their capitalized costs at i =10% per year. Alternative First cost, $ АОC, $/year Salvage value, $ Life, years A1 50,000 -30,000 5,000 B2 300,000 10,000 70,000 C3 900,000| 3,000 200,000

Compare three mutually exclusive alternatives on the basis of their capitalized costs at i =10% per year. Alternative First cost, $ АОC, $/year Salvage value, $ Life, years A1 50,000 -30,000 5,000 B2 300,000 10,000 70,000 C3 900,000| 3,000 200,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

### Comparison of Three Mutually Exclusive Alternatives

The table below evaluates three alternatives (A1, B2, C3) by comparing their capitalized costs at an interest rate of 10% per year.

| Alternative | A1 | B2 | C3 |
|-------------|--------|--------|-----------|
| **First cost, $** | -50,000 | -300,000 | -900,000 |
| **AOC, $/year** | -30,000 | -10,000 | -3,000 |
| **Salvage value, $** | 5,000 | 70,000 | 200,000 |
| **Life, years** | 2 | 4 | ∞ |

#### Explanation:
- **First cost:** Initial investment required for each alternative.
- **AOC (Annual Operating Cost):** Yearly cost of operating the alternative.
- **Salvage value:** Expected resale value at the end of its life.
- **Life:** Expected duration of usefulness for the equipment or project, with C3 having an infinite lifespan.

This information helps in determining the most cost-effective option when considering the capitalized costs.

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