1. The present worth of both the alternatives can be determined by the following equation
In case of alternative A
Initial cost, I = KD 4,000
Annual benefit, A = KD 639
MARR, i= 6%
Similarly for alternative B we can calculate PW
Since, PW of A is greater than B. So, select alternative A.
Now, determine the difference between the two alternatives
PWA - PWB = KD 3,329.33 - 3,029 = KD 300.33
So, up to a initial cost of KD 4,300 alternatives A will be preferable over B.
Option C. KD 4,300
5. In case of determining present value we have to use the following excel syntax
=-PV(6%,20,639)
Or, "=-PV(i%,n,A)"
If you wish to determine the Net Present value that is Present Worth then
"=-PV(6%,20,639)+(-4,000)"
Or, "=-PV(i%,n,A)+I"
Please contact if having any query thank you.
engineering economics number 5 of return is decision is to our estimate of the initial cost...
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