Two business alternators (shown in Table below) are competing with one another.

Question

Two business alternators (shown in Table below) are competing with one another. The first Alternative A is a four year project, while the second Alternative B is an eight year project. Interest rate is 10% How must this be solved Solve each PW independently at their individual time frames and compare Solve each PW at the LCM and compare Solve each AW independently at their individual time frames and compare Both i and iii Both ii and iii Trick Question - this can't be solved Solve and show which Alternative is the desirable Alternative (using any method/tool you deem appropriate and correct)

Explanation / Answer

a. i. Solve each PW independently at their individual time frame & compare Alternative A b Term Investment Annual revenue Annual Maintenance Cashflow PV Factor @ 10% PV of Cash flows 0 -350000 -350000 1 -350000 1 190000 64500 254500 0.909091 231363.6 2 190000 64500 254500 0.826446 210330.6 3 190000 64500 254500 0.751315 191209.6 4 190000 64500 254500 0.683013 173826.9 NPV 456730.8 Alternative B Term Investment Annual revenue Annual Maintenance Cashflow PV Factor @ 10% PV of Cash flows 0 -500000 -500000 1 -500000 1 250000 138300 388300 0.909091 353000 2 250000 138300 388300 0.826446 320909.1 3 250000 138300 388300 0.751315 291735.5 4 250000 138300 388300 0.683013 265214.1 5 250000 138300 388300 0.620921 241103.7 6 250000 138300 388300 0.564474 219185.2 7 250000 138300 388300 0.513158 199259.3 8 250000 138300 388300 0.466507 181144.8 NPV 1571552 The second alternative is offering more NPV and hence the same may be taken up

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.