ue Consider alternatives shown below, using an interest rate of 8% per year Annu

Question

ue Consider alternatives shown below, using an interest rate of 8% per year Annualoperating cost, $ per year Salvage value PW of alternatives A and B A Select A B PW A $47400 and PWB- $38958.7 CEWA#-S47400 and EWB -$38958 D Select A E. PWA- -$30927 and PwB $35051 F Which Alternative to select using PW G Select B H AW A -$12.000.6 and AW B- $1360084 FY A-598958.7 and FW B $47400 Annual Worth of alternatives A and B :/Which alternative to select using AW Which Alternative to select using Pw Future worth analysis of the alternatives DOLL

Explanation / Answer

ANSWER:

1) Present worth of alternative a :

pw = first cost + aoc(p/a,i,n) + salvage value(p/f,i,n)

i = 8% and n = 3 years

pw = -23,000 - 4,000(p/a,8%,3) + 3,000(p/f,8%,3)

pw = -23,000 - 4,000 * 2.577 + 3,000 * 0.7938

pw = -23,000 - 10,308 + 2,381.4

pw = -$30,926.6

Pw of alternative b :

pw = first cost + aoc(p/a,i,n) + salvage value(p/f,i,n)

i = 8% and n = 3 years

pw = -30,000 - 3,500(p/a,8%,3) + 5,000(p/f,8%,3)

pw = -30,000 - 3,500 * 2.577 + 5,000 * 0.7938

pw = -30,000 - 9,019.5 + 3,969

pw = -$35,050.5

so we will select alternative a as the pw of alternative a is more then alternative b.

2) annual worth of alternative a :

aw = pw(a/p,i,n)

i = 8% and n = 3 years

aw = -$30,926.6(a/p,8%,3)

aw = -30,926.6 * 0.388

aw = -$11,999.5

annual worth of alternative b:

aw = pw(a/p,i,n)

i = 8% and n = 3 years

aw = -$35,050.5(a/p,8%,3)

aw = -35,050.5 * 0.388

aw = -$13,599.6

so we select alternative a as the annual worth of alternative a is more then that of alternative b.

3) future worth of alternative a :

fw = pw(f/p,i,n)

fw = 30,926.6(f/p,8%,3)

fw = 30,926.6 * 1.26

fw = -$38,967.52

fw of alternative b:

fw = pw(f/p,i,n)

fw = -$35,050.5(f/p,8%,3)

fw = -$35,050.5 * 1.26

fw = -$44,163.6

so we will select alternative a based on future worth .

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