The right answer to problem 4 is b, could someone post the solution for each par

Question

The right answer to problem 4 is b, could someone post the solution for each part please.

You are asked to identify a replacement for a current company asset. The following are all potential Alternative Useful life Initial Investment Annual Operating Cost Terminal Salvage Value A 4 $ 17,000,00 $ 8,500,00 $ 2,400,00 B 5 $ 22,000,00 $ 5,500,00 $ 3,000,00 C 6 $ 30,000,00 $ 4,100,00 $ 3,400,00 If we consider this a "one shot" investment, what is the present worth of the best given alternative? Alternative A Alternative B Alternative C The Do Nothing Alternative If we use an infinitely long planning horizon, what is the calculated worth pf the best given alternatives? Alternative A Alternative B Alternative C The Do Nothing Alternative. Based on all your calculation above, which is actual best alternative? Option A Option B Option C The Do Nothing Alternative.

Explanation / Answer

(1) Present worth ($):

Alt A: 17,000 + 8,500 x PVIFA(12%, 4) - 2,400 x PVIF(12%, 4) = 17,000 + 8,500 x 3.0373 - 2,400 x 0.6355

= 17,000 + 25,817 - 1,525 = 41,292

Alt B: 22,000 + 5,500 x PVIFA(12%, 5) - 3,000 x PVIF(12%, 5) = 22,000 + 5,500 x 3.6048 - 3,000 x 0.5674

= 22,000 + 19,826 - 1,702 = 40,124

Alt C: 30,000 + 4,100 x PVIFA(12%, 6) - 3,400 x PVIF(12%, 6) = 30,000 + 4,100 x 4.1114 - 3,400 x 0.5066

= 30,000 + 16,857 - 1,722 = 45,135

So, Alt B has the lowest present worth of costs, so this is the best option.

Note: First question is answered.

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