Solution-Compare the present worth values of the

Compare the present worth values of the alternatives

Reference no: EM133073156

The type of construction a contractor undertakes necessitates the purchase of equipment that will provide standby electrical power in its construction sites. Alternative A involves an initial cost of 572,000, a 9-year useful life, an annual cost of 52,200 the first year and increasing 5300 per year thereafter, and a net salvage value of $8,400 at the end of the useful life. Alternative B has an initial cost of 590.000, a 12-year useful life, annual costs of $2,100, and a net salvage value of $13.000. The current interest rate is 10% compounded annually

a) Which alternative is preferred based on the repeatability assumption? Compare the present worth values of the alternatives to justify your decision.

b) Compare the present worth values of Alternatives A and B over an infinite analysis period. Which alternative Is preferable?

Reference no: EM133073156

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Compare the present worth values of the alternatives

Reference no: EM133073156

Reference no: EM133073156

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