Show the negative equivalent worth in the base period

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Question: Annual expenses for two alternatives have been estimated on different bases as follows:

Alternative A                    Alternative B

Annual Expenses             Annual Expenses

End of             Estimated in                   Estimated in Real

Year               Actual Dollars                 Dollars with b = 0

1                   $120,000                           $100,000

2                   132,000                               110,000

3                   148,000                               120,000

4                   160,000                                130,000

If the average general price inflation rate is expected to be 4% per year and the real rate of interest is 8% per year, show which alternative has the least negative equivalent worth in the base period?

Reference no: EM131506427

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