Question: Some equipment will be installed in a warehouse that a firm has leased for 8 years. There are two alternatives. Alternative A with the initial
Some equipment will be installed in a warehouse that a firm has leased for 8 years. There are two alternatives. Alternative A with the initial cost of $100, a uniform annual benefit of $55 and a useful life of 4 years. Alternative B with initial cost of $125, a gradient-induced annual benefit composed of two components: 1) A first year benefit of $45 and 2) A gradient of $10 on each subsequent years; and a useful life of 4 years. Assume that the effective interest rate is 10%. Please use the annual cash flow analysis for a 7-year period to recommend the preferred alternative for this case
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