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Use Annual Cost Analysis to determine whether Alternative A or B should be chosen. The analysis period is 5 years. Assume an interest rate of 6% per year, compounded annually Alternative A Alternative B 1800 150 400 5 Initial Cost Annual Benefit Salvage Value Useful Life (yrs) 4230 340 2100 5 Alternative B should be chosen, because its annual benefit is higher than Alternative A's

Use Annual Cost Analysis to determine whether Alternative A or B should be chosen. The analysis period is 5 years. Assume an interest rate of 6% per year, compounded annually Alternative A Alternative B 1800 150 400 5 Initial Cost Annual Benefit Salvage Value Useful Life (yrs) 4230 340 2100 5 Alternative B should be chosen, because its annual benefit is higher than Alternative A's

Essentials Of Investments
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
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Use Annual Cost Analysis to determine whether Alternative A or B should be chosen. The analysis period is 5 years. Assume an interest rate of 6% per year, compounded annually Alternative A Alternative B 1800 150 400 5 Initial Cost Annual Benefit Salvage Value Useful Life (yrs) 4230 340 2100 O Alternative B should be chosen, because its annual benefit is higher than Alternative A's Alternative A should be chosen, because its initial cost is lower than Alternative B's O Alternative B should be chosen, because its equivalent annual cost is $85.30 higher than Alternative A's Alternative A should be chosen, because its equivalent annual cost is $85.30 lower than Alternative B's
Transcribed Image Text:Use Annual Cost Analysis to determine whether Alternative A or B should be chosen. The analysis period is 5 years. Assume an interest rate of 6% per year, compounded annually Alternative A Alternative B 1800 150 400 5 Initial Cost Annual Benefit Salvage Value Useful Life (yrs) 4230 340 2100 O Alternative B should be chosen, because its annual benefit is higher than Alternative A's Alternative A should be chosen, because its initial cost is lower than Alternative B's O Alternative B should be chosen, because its equivalent annual cost is $85.30 higher than Alternative A's Alternative A should be chosen, because its equivalent annual cost is $85.30 lower than Alternative B's
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