Alternative A and B are two mutually exclusive cost alternatives, and one of them must be...

 

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Alternative A and B are two mutually exclusive cost alternatives, and one of them must be selected. Using Incremental Analysis, which of the alternatives should be recommended based on ERR (the External Rate of Return)? Why? MARR (Minimum acceptable rate of return) is 12% per year while the re-investment rate is 10% per year. The study period is 20 years. Assume repeatability is appropriate for this comparison. Alternative A $ (101,000) $ (6,000) 20 years $ (6,000 ) $ (18,500 ) 10 years Initial capital investment Annual operating expenses Useful life Salvage value None None Alternative A and B are two mutually exclusive cost alternatives, and one of them must be selected. Using Incremental Analysis, which of the alternatives should be recommended based on ERR (the External Rate of Return)? Why? MARR (Minimum acceptable rate of return) is 12% per year while the re-investment rate is 10% per year. The study period is 20 years. Assume repeatability is appropriate for this comparison. Alternative A $ (101,000) $ (6,000) 20 years $ (6,000 ) $ (18,500 ) 10 years Initial capital investment Annual operating expenses Useful life Salvage value None None

Answer rating: 100% (QA)

Year A B AB 0 100000 5000 95000 1 20 5000 17500 12500 10 5000 5000 The ... View the full answer