Economics problem Complete the following analysis of investment alternatives and

Question

Economics problem

Complete the following analysis of investment alternatives and select the preferred alternative. The study period is three years and the MARR= 18% per year Alternative Alternative Alternative Capital investment Annual revenues Annual costs Market value at EOY 3 PW (18%) $11,100 3,900 $15,000 6,500 $12,900 72 Click the icon to view the intere More Info The PW of the alternative B is $ Discrete Compounding; 1-18% Single Payment Uniform Series Compound Capital Recovery Compound Present Present Worth Factor To Find P Given A Factor To Find A Given F Factor Worth Factor Factor To Find F Given A To Find F To Find P Given F To Find A Given P Given P 0.8475 0.6086 0.4371 0.8475 1.5656 2.1743 2.6901 3.1272 3.4976 1.1800 0.6387 0.4599 0.3717 1.0000 0.4587 0.2799 1.0000 1.1800 1.3924 1.6430 1.9388 2.2878 2.6996 3.1855 3.7589 4.4355 5.2338 6.1759 7.2876 8.5994 10.1472 11.9737 3.5724 4 7.1542 9.4420 12.1415 15.3270 19.0859 23.5213 28.7551 34.9311 42.2187 50.8180 60.9653 0.1398 0.1059 0.0824 0.0652 0.0524 0.0425 0.0348 0.0286 0.0237 0.2859 0.2624 0.2452 0.2324 0.2225 0.2148 0.2086 0.2037 0.1997 0.1964 0.3704 4.0776 4.3030 4.4941 4.6560 4.7932 4.9095 5.0081 5.0916 0.2660 0.2255 10 12 13 0.1372 0.0985 0.0835 0.0164

Explanation / Answer

For alternative B, Annual benefit ($) = Annual revenue - Annual cost = 6,500 - 500 = 6,000

PW, Alt B ($) = - 15,000 + 6,000 x P/A(18%, 3) + 6,150 x P/F(18%, 3)

= - 15,000 + 6,000 x 2.1743 + 6,150 x 0.6086 = - 15,000 + 13,045.8 + 3,742.89

= 1,788.69 (rounded off to 2 decimals)

= 1,788.7 (rounded off to 1 decimal)

= 1,789 (rounded off to integer)

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