Homework Answers
Find the AW using a rate of interest = 20% and time = 20 years
AW of A = -473,000(A/P, 20%, 20) + 104,100 = -473,000*0.205357 + 104,100 = $6,966.36
AW of B = -1,114,000(A/P, 20%, 20) + 235,000 = -1,114,000*0.205357 + 235,000 = $6,232.82
Most profitable alternative is A. Its AW is $6,966.36.
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