Question

Consider three alternatives:
A B C
First cost $50 $150 $110
Uniform annual benefit 28.8 39.6 39.6
Useful life, in years* 2 6 4
Computed rate of return 10% 15% 16.4%
*At the end of its useful life, an identical alternative (with the same cost, benefits, and useful life) may be installed.
All the alternatives have no salvage value. If the MARR is 12% which alternatives should be selected?
(a) Solve the problem by future worth analysis.
(b) Solve the problem by benefit-cost ratio analysis. 9-49
(c) Solve the problem by payback period.
(d) If the answers in parts (a), (b), and (c) differ, explain why this is the case.


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  • CreatedFebruary 25, 2010
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