Two mutually exclusive alternatives

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Consider the following two mutually exclusive alternatives:

Alternative 1                         Alternative 2

Cost                                                     $8,000                                     $13,500

Uniform annual benefit                         1,200                                         1,900

Useful life, in years                             forever                                           15

Alternative 2 may be replaced with an identical item every 15 years at the $13,500 cost and will have the $1,900 uniform annual benefit. Assume a 12% interest rate and you must use annual cash flow analysis. Which alternative is the best?

Reference no: EM131460384

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