Two new instruments are being considered for an engineering firm. The firm uses a 12%/year expected rate of return for decisions of this type. The relevant characteristics for each option are shown below. Both options are expected to be long term (no end date). Assume the equipment has no economic value after the end of its estimated life. Please use Least Common Multiple method to determine which option should be picked. Option 1 Option 2 Initial Investment $120,000 $85,000 Estimated Life 12 years 9 years Expected Annual Return $17,500 $16,100 1. What Option1's NPV using Least Common Multiple Method? 2. What Option2's NPV using Least Common Multiple Method? 3. Which option should be picked using LCM?:

Two new instruments are being considered for an engineering firm. The firm uses a 12%/year expected rate of return for decisions of this type. The relevant characteristics for each option are shown below. Both options are expected to be long term (no end date). Assume the equipment has no economic value after the end of its estimated life. Please use Least Common Multiple method to determine which option should be picked. Option 1 Option 2 Initial Investment $120,000 $85,000 Estimated Life 12 years 9 years Expected Annual Return $17,500 $16,100 1. What Option1's NPV using Least Common Multiple Method? 2. What Option2's NPV using Least Common Multiple Method? 3. Which option should be picked using LCM?:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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