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2. Consider the following two mutually exclusive alternatives: Cost, $ Uniform annual benefit, $ Useful life, years 100,000 1
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Answer #1

Annual worth of alternative A = -100,000(A/P, 10%, ∞) + 16,000

                                               = -100,000 (0.10) + 16,000

                                               = -10,000 + 16,000

                                               = $6,000

Annual worth of alternative B = -150,000(A/P, 10%, 20) + 24,000

                                               = -150,000 (0.1175) + 24,000

                                               = -17,625 + 24,000

                                               = $6,375

Since Annual worth of alternative B is more than alternative A, therefore, alternative B should be selected.

A CAD for alternative A = $16,500 1 2 3 Dodo , : 10% 100,000 CFA for alternative B A = $24,000 23 CS50060 with 1:20, 2=10% Ca

                   

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