Please show how your answer was determined. 4. In comparing different-life alter

Question

Please show how your answer was determined.

4. In comparing different-life alternatives by the annual worth method, an assumption inherent in using annual worth values for one life cycle is: The alternatives will be needed for an indefinte period of time The alternatives will be added only through the life of the shorter-life alternative. All of the costs associated with each asset remain the same in succeeding life cycles. The costs of the alternatives will change nh by the inflation or deflation rate. That it is better to fight 100 duck sized horses than 1 horse sized duck.

Explanation / Answer

4. In comparing different life alternatives by the annual worth method, an assumption inherent in using annual worth values for one life cycle is:

The alternatives will be needed for an indefinite period time

Explanation :-
Annual worth value method need to be calculated for only one life cycle so it gives a computational and interpretation advantage. The Annual Worth value determined over one life cycle is the annual worth for all future life cycles. Thus the alternatives will be needed for an indefinite period time as the value is determined for future life cycles too and we do not know till when it will be required as it is for all future life cycles so it will be required for indefinite period.

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