Homework Answers
I = 8%
Analysis period = 10 yrs
CFD of A
CFD of B
NPW of A = -6500 + 1800 * (P/A, 8%,10) - 6500 * (P/F, 8%,5)
= -6500 + 1800 * 6.710081 - 6500 * 0.680583
= 1154.36
NPW of B = -12000 + 2000 * (P/A, 8%,10)
= -12000 + 2000 * 6.710081
= 1420.16
As the NPW of B is more, it should be selected
Present value of savings = 1420.16 - 1154.36 = 265.80
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