For the data presented below on alternatives A and B and assuming a 10% interest rate,...
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For the data presented below on alternatives A and B and assuming a 10% interest rate, determine which alternative should be recommended using the following methods. Alternative A can be bought again at the end of its useful life. (40 points) A B First cost $5,300 $9,500 Uniform annual benefit 2,000 2,100 Useful life 4 years 8 years Salvage value 200 On the manual solution, • Draw the required cash flow diagrams (6 pts) And make sure you include the following for ALL methods: • What is the decision criteria? (6 pts) • Present the required equivalency models. (10 pts) • Show ALL calculations to choose the best alternative. (12 pts) • What is the best alternative? (6 pts) Using the benefit-cost ratio method: Choose... Using the payback method: Choose... Using the internal rate of return method: Choose... For the data presented below on alternatives A and B and assuming a 10% interest rate, determine which alternative should be recommended using the following methods. Alternative A can be bought again at the end of its useful life. (40 points) A B First cost $5,300 $9,500 Uniform annual benefit 2,000 2,100 Useful life 4 years 8 years Salvage value 200 On the manual solution, • Draw the required cash flow diagrams (6 pts) And make sure you include the following for ALL methods: • What is the decision criteria? (6 pts) • Present the required equivalency models. (10 pts) • Show ALL calculations to choose the best alternative. (12 pts) • What is the best alternative? (6 pts) Using the benefit-cost ratio method: Choose... Using the payback method: Choose... Using the internal rate of return method: Choose...
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Alternative A is the best since here net Present value of cash flow is the less 142 compared ... View the full answer
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