There is a continuing requirement for stand by electrical power at a public utility service facility. Alternative A involves an initial cost of $72,000, a 3-year useful life. and an annual cost of $2,200 the first year and increasing $300 per year thereafter and a net salvage value of $8,400 at the end of the useful life. Alternative B has an initial cost of $90,000. a six-year useful life, and annual cost of 2,100 and a net salvage value of $13,000. The current interest rate is 10% annually. What alternative are you going to recommend if you use the repeatability (study period is 6 years) and co terminated (study period is 3 years, epsilon = 10%) assumptions?
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There is a continuing requirement for stand by electrical power at a public utility
service facility. Alternative A involves an initial cost of $72,000, a 3-year useful life.
and an annual cost of $2,200 the first year and increasing $300 per year thereafter
and a net salvage value of $8,400 at the end of the useful life. Alternative B has an
initial cost of $90,000. a six-year useful life, and annual cost of 2,100 and a net
salvage value of $13,000. The current interest rate is 10% annually. What
alternative are you going to recommend if you use the repeatability (study
period is 6 years) and co terminated (study period is 3 years, epsilon = 10%) assumptions?
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