The following four mutually exclusive alternatives have no salvage value after 1
ID: 1092080 • Letter: T
Question
The following four mutually exclusive alternatives have no salvage value after 10 years.
A: First cost: $7500 uniform annual benefit: 1600 computed rate of return: 16.8%
B: First cost: $5000 Uniform annual benefit: 1200 computed rate of return: 20.2%
C: First cost: $5000 uniform annual benefit: 1000 computed rate of return: 15.1%
D: First cost: $8500 uniform annual benefit: 1700 computed rate of return: 15.1%
a) Construct a choice table for interest rates from 0% to 100%.
b) Using 8% for the MARR, which alternative should be selected?
Explanation / Answer
a) Choice table
b) At MARR= 8%, A is the best alternative as shown in above table
NPV Interest rate A B C D Choice 0% 8,500.00 7,000.00 5,000.00 8,500.00 A or B 5% 4,854.78 4,266.08 2,721.73 4,626.95 A 8% 3,236.13 3,052.10 1,710.08 2,907.14 A 10% 2,331.31 2,373.48 1,144.57 1,945.76 B 15% 530.03 1,022.52 18.77 31.91 B 20% (792.04) 30.97 (807.53) (1,372.80) B 25% (1,787.19) (715.40) (1,429.50) (2,430.14) B 30% (2,553.54) (1,290.15) (1,908.46) (3,244.38) B 35% (3,155.93) (1,741.95) (2,284.96) (3,884.43) B 40% (3,638.29) (2,103.71) (2,586.43) (4,396.93) B 45% (4,030.99) (2,398.24) (2,831.87) (4,814.17) B 50% (4,355.49) (2,641.62) (3,034.68) (5,158.96) B 55% (4,627.25) (2,845.44) (3,204.53) (5,447.71) B 60% (4,857.59) (3,018.19) (3,348.49) (5,692.44) B 65% (5,054.92) (3,166.19) (3,471.82) (5,902.10) B 70% (5,225.62) (3,294.22) (3,578.51) (6,083.48) B 75% (5,374.59) (3,405.94) (3,671.62) (6,241.75) B 80% (5,505.60) (3,504.20) (3,753.50) (6,380.95) B 85% (5,621.66) (3,591.24) (3,826.03) (6,504.26) B 90% (5,725.12) (3,668.84) (3,890.70) (6,614.19) B 95% (5,817.91) (3,738.43) (3,948.69) (6,712.78) B 100% (5,901.56) (3,801.17) (4,000.98) (6,801.66) BRelated Questions
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