9-54 Three mutually exclusive altermatives are being A considered: Initial cost Benefit at end of the first $500 $400 $300 200 200 200 year Uniform benefit at end of 100 125 100 subsequent years Useful life, in years At the end of its useful life, an alternative is not replaced. If the MARR is 10%, which alternative should be selected (a) Based on the pay back period? (b) Based on benefit-cost ratio analysis? 10-4 A heat exchanger is being installed as part of a plant modernization program. It costs $80,000, including installation, and is expected to reduce the overall plant fuel cost by $20,000 per year. Estimates of the useful life of the heat exchanger range from an opti- mistic 12 years to a pessimistic 4 years. The most likely value is 5 years. Assume the heat exchanger has no salvage value at the end of its useful life. (a) Determine the pessimistic, most likely, and opti- mistic rates of return. (b) Use the range of estimates to compute the mean life and determine the estimated before-tax rate of return