Question

* Question Completion Status: Mutually Exclusive Alternative Four mutually exclusive alternatives are being evaluated, and their costs and revenues are itemized in Table a. If the MARR is 15% per year and the analysis period is 12 years, use the PW method to determine which alternatives are economically acceptable and which one should be selected? Capital Investment Annual Revenues less expenses Market Value (end of useful life) Useful life (years) $150,000 15,200 10,000 $125,000 31,900 $200,000 35,900 15,000 $100,000 41,500 20,000 12 12 PW (Altertative I): PW (Altertative il): PW (Altertative III): PW (Altertative IV): Best Alternative IV ($115,737.52) ($11,082.25) $45,403.83 $128,693.83 PW (Altertative I): PW (Altertative ll): PW (Altertative III): PW (Altertative IV): Best Alternative IV ($67,737.52) $162,917.75 ($22,596.17) $44,693.83

Answer 1

The correct answer is 1st option

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Present worth of alternative 1 = - $ 200,000 + $ 15,200 $\times$ (P/A, 15%, 12 years) + $ 10,000 $\times$ (P/F, 15%, 12 years)

Present worth of alternative 1 =   - $ 200,000 + $ 15,200 $\times$ 5.420619 + $ 10,000 $\times$ 0.1869

Present worth of alternative 1 = - $ 115,737.59

Present worth of alternative 2 = - $ 184,000+ $ 31,900 $\times$ (P/A, 15%, 12 years)

Present worth of alternative 2 = - $ 184,000+ $ 31,900 $\times$ 5.420619

Present worth of alternative 2 = - $ 11,082.25

Present worth of alternative 3 = - $ 152,000 + $ 35,900 $\times$ (P/A, 15%, 12 years) + $ 15,000 $\times$ (P/F, 15%, 12 years)

Present worth of alternative 3 = - $ 152,000 + $ 35,900 $\times$ 5.420619 +  $ 15,000 $\times$    0.1869

Present worth of alternative 3 = $ 45,403.72

Present worth of alternative 4 = - $ 100,000 + $ 41,500 $\times$ (P/A, 15%, 12 years) + $ 20,000 $\times$ (P/F, 15%, 12 years)

Present worth of alternative 4 = - $ 100,000 + $ 41,500 $\times$ 5.420619 + $ 20,000 $\times$    0.1869

Present worth of alternative 4 = $ 128,693.69

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The best alternative is IV because it has the highest present worth compared to other alternatives.