Compare these alternatives using the present-worth method

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Reference no: EM131870414

Three alternative proposals for developing the water resources of a region are being evaluated for funding. The design life of all alternatives is 30 years and market conditions indicate an interest rate of 5%.

The first alternative requires an initial investment of $100,000, produces annual revenues beginning with $25,000 in year 1, and increasing by $1,000 per year, operating costs begin with $3,000 in the first year and increase by $2,000 per year, and the salvage value of the capital investment is $10,000 at the end of 30 years.

The second alternative requires an initial investment of $50,000, produces annual revenues beginning with $40,000 in year 1 and decrease by $5,000 per year, operating costs begin with $5,500 in the first year and increase by $2,000 per year, and the salvage value of the capital investment is $5,000 at the end of 30 years.

The third alternative requires an initial investment of $65,000, produces annual revenues of $10,000 per year and operating costs of $6,000 per year, and the salvage value of the capital investment is $12,000.

Compare these alternatives using the present-worth method and identify any that are not economically feasible.

Reference no: EM131870414

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