QUESTION 2 (20 MARKS)

A certain long-term project is currently being carried out at an annual labour expense of N$15 000. Alternative A is to leave the operation unchanged. Alternative B is to invest N$25 000 for acquisition of equipment which will allow the project to be implemented at a lower labour cost of N$ 10 000. The investment must be recovered in 10 years according to the set policy. Alternative C is proposal to introduce another labour savings cost equipment costing N$20 000 which will reduce the labour cost to N$8000. The equipment will be fully depreciated in 5 years and will not have a salvage value. Table 1 present detail information:

Table 1: Three Alternative Projects

Year	Alternative A	Alternative B	Alternative C
0	15,000	25,000	20,000
1	15,000	10,000	8,000
2	15,000	10,000	8,000
3	15,000	10,000	8,000
4	15,000	10,000	8,000
5	15,000	10,000	28,000
6	15,000	10,000	8,000
7	15,000	10,000	8,000
8	15,000	10,000	8,000
9	15,000	10,000	8,000
10	15,000	10,000	8,000

Considering a present value method, If the minimum acceptable rate of return is 8%, which of the following alternative gives the highest economic benefit?

1. Calculate Present Value for Alternative A
2. Calculate Present Value for Alternative B
3. Calculate Present Value for Alternative C
4. Indicate and explain which alternative yield the highest economic benefit?