Investor group offered three proposals:

a) To invest $2,300,000 on this product with annual O&M of $45,000 starting end of year one. The proposal is expected to result in annual benefit in cash flow of $750,000, over 4 years period with interest rate of 12 %.

b) To invest $1,800,000 on this product with annual O&M of $75,000 starting end of year one. The proposal is expected to result in annual benefit in cash flow of $715,000, over 7 years period with interest rate of 12 %.

c)To invest $1,500,000 on this product with annual O&M of $90,000 starting end of year one. The proposal is expected to result in benefit in cash flow of $120,000 first year, which increases by $50000 yearly over 28 years period with interest rate of 12 %.

Which proposal you should accept? please use the present worth analysis and please provide the cash flow diagrams for each proposal.

Answer rating: 100% (QA)

To determine which proposal to accept we can use present worth analysis to calculate the net present value NPV of each proposal The proposal with the ... View the full answer