financial data related to three different alternatives are provided in the table

Question

financial data related to three different alternatives are provided in the table below. Assume that useful lives are all 10 years. Annual interest rate is 8%

P Initial cost=$5000 Annual additional cost=$1000 Uniform annual benefits=$2500
Q Initial cost=$1000 Annual additional cost=$25 Uniform annual benefits=$200
R Initial cost=$2500 Annual additional cost=$150 Uniform annual benefits=$500
What are the alternatives of P, Q, R. Which alternative is the best choice? financial data related to three different alternatives are provided in the table below. Assume that useful lives are all 10 years. Annual interest rate is 8%

P Initial cost=$5000 Annual additional cost=$1000 Uniform annual benefits=$2500
Q Initial cost=$1000 Annual additional cost=$25 Uniform annual benefits=$200
R Initial cost=$2500 Annual additional cost=$150 Uniform annual benefits=$500
What are the alternatives of P, Q, R. Which alternative is the best choice? financial data related to three different alternatives are provided in the table below. Assume that useful lives are all 10 years. Annual interest rate is 8%

P Initial cost=$5000 Annual additional cost=$1000 Uniform annual benefits=$2500
Q Initial cost=$1000 Annual additional cost=$25 Uniform annual benefits=$200 Initial cost=$1000 Annual additional cost=$25 Uniform annual benefits=$200
R Initial cost=$2500 Annual additional cost=$150 Uniform annual benefits=$500 Initial cost=$2500 Annual additional cost=$150 Uniform annual benefits=$500
What are the alternatives of P, Q, R. Which alternative is the best choice?

Explanation / Answer

12)

EUAW = EUAB - EUAC

EUAB = $ 2500

EUAC = $ 5000 ( A/P, 8% , 10 years) + $ 1000

EUAC = $ 5000 * 0.149029 + $ 1000

EUAC = $ 1745.15

EUAW = $ 2500 -   $ 1745.15

EUAW P= $ 754.86

_____________________________________________________________

13)

EUAW = EUAB - EUAC

EUAB = $ 200

EUAC = $ 1000 ( A/P, 8% , 10 years) + $ 25

EUAC = $ 1000 * 0.149029 + $ 25

EUAC = $ 174.029

EUAW = $ 200 -  $ 174.029

EUAW Q = $ 25.97

______________________________________________________________

14)

EUAW = EUAB - EUAC

EUAB = $ 500

EUAC = $ 2500 ( A/P, 8% , 10 years) + $ 150

EUAC = $ 2500 * 0.149029 + $ 150

EUAC = $ 522.57

EUAW = $ 500 -  $ 522.57

EUAW R = - $ 22.57

_____________________________________________________

Alternative P is the best choice because it has the highest EUAW.

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