Reconsider the data from Problem 51. What is the capital recovery cost of Alternative 3 for a
Question:
Reconsider the data from Problem 51. What is the capital recovery cost of Alternative 3 for a 6-year life?
Data from problem 51
Alternatives 1, 2, and 3 have lives of 3, 4, and 6 years, respectively. Their net cash flow (NCF) and salvage value (SV) profiles are as follows:
Additional explanation is necessary: The NCF profile of Alternative 1 that is shown above is the net result of a \($20,000/year\) lease payment payable at the beginning of each year, plus an end of year net revenue of \($28,000.\) This lease arrangement may be renewed in 3-year increments; however, premature cancellation of the lease results in a lease termination penalty (cost) of \($10,000\) at the time of cancellation. MARR is 8 percent.
Step by Step Answer:
Principles Of Engineering Economic Analysis
ISBN: 9781118163832
6th Edition
Authors: John A. White, Kenneth E. Case, David B. Pratt