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Problem 05.023 Alternative Comparison - Different Lives Compare the alternatives C and D on the basis of a present worth anal

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Answer #1

NPW of alternative C = -44000 - 12000 * (P/A, 12%,10) - 1200 * (P/G, 12%,10) + 5000 * (P/F, 12%,10)

= -44000 - 12000 * 5.650223 - 1200 * 20.254089 + 5000 * 0.321973

= -134497.72

NPW of alternative D = -34000 - 7000 * (P/A, 12%,5) - 1500 * (P/G, 12%,5) + 1200 * (P/F, 12%,5) + (-34000 - 7000 * (P/A, 12%,5) - 1500 * (P/G, 12%,5) + 1200 * (P/F, 12%,5))*(P/F, 12%,5)

= -34000 - 7000 * 3.604776 - 1500 * 6.397016 + 1200 * 0.567427 + (-34000 - 7000 * 3.604776 - 1500 * 6.397016 + 1200 * 0.567427)* 0.567427

= -106817.08

Alternative D whould be selected as it has lowr present cost

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