Project Cash Flows -$1,200 -$2,100 1 -$400 -$300 2 -$400 -$300 -$400 + $200 -$300 -$300 4 5 -$300 6 -$300 7 -$300 8 -$300 + $500

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consider the following two mutually exclusive investment projects that have unequal service lives:

(a) What assumption(s) do you need in order to compare a set of mutually exclusive investments with unequal service lives?
(b) With the assumption(s) defined in (a) and using i = 10%, determine which project should be selected.
(c) If your analysis period (study period) is just three years, what should be
the salvage value of Project B at the end of year 3 in order to make the two
alternatives economically indifferent?

Project Cash Flows
-$1,200
-$2,100
1
-$400
-$300
2
-$400
-$300
-$400 + $200
-$300
-$300
4
5
-$300
6
-$300
7
-$300
8
-$300 + $500
Transcribed Image Text:Project Cash Flows -$1,200 -$2,100 1 -$400 -$300 2 -$400 -$300 -$400 + $200 -$300 -$300 4 5 -$300 6 -$300 7 -$300 8 -$300 + $500
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