Consider the two mutually exclusive investment projects in Table P5.48, which have unequal service lives. (a) What

Question:

Consider the two mutually exclusive investment projects in Table P5.48, which have unequal service lives.

(a) What assumption(s) do you need in order to compare a set of mutually exclusive investments with unequal service lives?
(b) With the assumption(s) defined in part (a) and using determine which project should be selected.
(c) If your analysis period (study period) is just three years, what should be the salvage value of project A2 at the end of year 3 to make the two alternatives economically indifferent?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...