To find:Best choice between option A and B,by calculating the present worth.
Answer to Problem 38P
The better option is B which would save
Explanation of Solution
Given information:
Formula used:
PW represents Present Worth
A is end of period cash receipt or disbursement in a uniform series continuing for “n” periods
F is Future sum of money at the end of the nth interest period, which is equivalent to “P” with interest rate “i”.
P isPresent sum of money
i is Effective interest rate per interest period
N is Number of interest period
Calculation:
By using the above-mentionedformulas, Present Worth is calculated.
Present Worth for choice A
The above formula gives the Present Worth for choice A of
Present Worth for choice B
The above formula gives the Present Worth for choice Bof
Therefore, the best choice between A & B is B as it saves
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