Parameter Alternative A Alternative B $150,000 $240,000 Initial investment Annual revenue $39,000 $50,000 (actual $) Annual cost (actual $5,000 in year 1 increasing by $500 each year for remaining years $6,000 S) Market value at end $25,000 $40,000 of useful life (year 0 S) Useful life, years 8
Parameter Alternative A Alternative B $150,000 $240,000 Initial investment Annual revenue $39,000 $50,000 (actual $) Annual cost (actual $5,000 in year 1 increasing by $500 each year for remaining years $6,000 S) Market value at end $25,000 $40,000 of useful life (year 0 S) Useful life, years 8
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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Question
Two mutually exclusive alternatives are being considered. The MARR is 15% per year. General inflation is 5.5%/year. Based on the data below, perform
an appropriate analysis to select the most economical alternative. State your assumptions.
Transcribed Image Text:Parameter
Alternative A
Alternative B
$150,000
$240,000
Initial investment
Annual revenue
$39,000
$50,000
(actual $)
Annual cost (actual $5,000 in year 1
increasing by
$500 each year for
remaining years
$6,000
S)
Market value at end $25,000
$40,000
of useful life
(year 0 S)
Useful life, years
8
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