Consider these two alternatives.

a. Suppose that the capital investment of Alternative 1 is known with certainty. By how much would the estimate of capital investment for Alternative 2 have to vary so that the initial decision based on these data would be reversed? The annual MARR is 15% per year.

b. Determine the life of Alternative 1 for which the AWs are equal.

Transcribed Image Text:

Alternative 1 Alternative 2 Capital investment Annual revenues $4,500 $6,000 $1,850 $500 $1,200 $1,600 $400 $800 Annual expenses Estimated market value 8 years Useful life 10 years