Which alternative should be chosen

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Reference no: EM131337467

BC Minerals is considering a new production process. Two alternative pieces of equipment are available. Alternative P costs $100,000, has a 10-year life, and is expected to generate annual cash inflows of $22,000 in each of the 10 years.

Alternative R costs $85,000, has an 8-year life, and is expected to generate annual cash inflows of $18,000 in each of the eight years. BC Minerals's weighted cost of capital is 12 percent.

Using the equivalent annual annuity method, which alternative should be chosen?

Reference no: EM131337467

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