Homework Answers
Project A
EUAW = Initial cost/ ((1-1/(1+rate)^number of terms)/rate) + EUAB+ FV/(((1+rate)^n-1)/rate)
= -8000/((1-1/1.15^12)/0.15) + 2000+ 1200/ ((1.15^12-1)/0.15)
= -1475.85+ 2000+ 41.38
= 565.53
Project B
EUAW = Initial cost/ ((1-1/(1+rate)^number of terms)/rate) + EUAB+ FV/(((1+rate)^n-1)/rate)
= -5000/((1-1/1.15^3)/0.15) + 1000+ 700/ ((1.15^3-1)/0.15)
=-988.30
Best alternative = A
(Since it has the higher EUAW)
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